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The European Central Bank (ECB) today cut interest rates by 0.25%, which represents the first cut in five years and reduces them to 3.75%. Crypto industry experts shared with Crypto Briefing that this move is important for different reasons, as it raises important questions about stablecoins in the European Union and demand for Bitcoin in the eurozone.
Aurelie Barthere, senior research analyst at Nansen, explained that markets had already priced in the ECB rate cut, so investors should have no surprises.
“Overall, the ECB has less influence than the Federal Reserve in cryptocurrency markets, and the ECB follows the Federal Reserve, not the other way around. The reason the ECB made cuts before the Federal Reserve is the weakness of growth in the eurozone compared to the United States,” Barthere added.
As reported According to the BBC, Christine Lagarde, president of the ECB, said the inflation outlook had improved “markedly”, paving the way for the rate cut. However, Lagarde warned investors to keep their hopes in check as inflation could average 2.5% in 2024 and the ECB would keep interest rate policy “sufficiently restrictive for as long as necessary.”
However, the ECB's decision could indirectly benefit the cryptocurrency market, highlighted Eneko Knörr, CEO of Stabolut. “While European economic policies may not have a direct influence on global crypto trends, lower interest rates generally drive investors towards higher risk and higher return assets,” he explained.
As a result, cryptocurrencies could become more attractive as investors look for better returns. Therefore, the rate cut could increase interest in cryptocurrencies as part of a broader quest for higher yields.
Furthermore, Bitfinex analysts assessed that this measure aims to stimulate economic growth amid signs of slowdown in the eurozone, although this could weaken the euro. This is good news for cryptocurrencies as investors in the European Union could increase their demand for alternative assets like Bitcoin. “The increase in liquidity from this monetary easing could also support risk assets, including cryptocurrencies.”
Kevin de Patoul, CEO of Keyrock, is also willing to believe that rate cuts are a bullish signal for markets with higher risks and potential returns. Furthermore, the stablecoin sector in the eurozone could suffer a significant impact.
“This move raises important questions about the future of EUR stablecoins, especially in light of the Crypto Asset Markets (MiCA) regulation that will come into force in June. “The rate cut could significantly affect the financial prospects of euro stablecoin issuers.”
Weighing whether this decision affects next week's FOMC meeting in the US, Knörr said the Federal Reserve's decisions are largely irrelevant to the ECB's actions, and vice versa. However, the ECB's rate cut could signal to markets that inflation concerns may be easing.
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