Bitcoin could experience an increase in inflows this week following a significant monetary policy decision in the European Union.
The European Central Bank (ECB) is anticipated to lower interest rates by 0.25% to 4.25% on June 6. This rate cut has the potential to enhance investor interest in risk assets, such as Bitcoin (BTC), as stated by Jag Kooner, the head of derivatives at Bitfinex. Kooner mentioned to Cointelegraph:
These rate cut expectations arise amidst a period of decelerating inflation in Europe. The Consumer Price Index (CPI) for May is forecasted to be around 2.6%, which could signify the eighth consecutive month of inflation remaining below the 3% threshold.
James Wo, the founder and CEO of Digital Financial Group, believes that the possible interest rate cut could stimulate traditional equity markets and provide Bitcoin with more positive momentum. Wo expressed to Cointelegraph:
Throughout May, two of Europe’s prominent stock indexes, the STOXX 600 and DAX 40, witnessed an increase, alongside Bitcoin’s price surge. The STOXX 600 saw a growth of over 3.3%, while the DAX 40 rose by more than 3.8% in the last 30 days, coinciding with BTC’s price surge of 17.4%, according to BitStamp.
Bitcoin’s historical correlation with traditional equity markets has been inconsistent. Nevertheless, in an environment driven by economic stimulus, Bitcoin may align with the movement of equities markets. Kooner mentioned to Cointelegraph:
Despite the lagging performance of equities in the United States, Bitcoin has shown significant strength this year. While the S&P 500 index has increased by 11.5% year-to-date (YTD), Bitcoin’s price has surged by 57.6% YTD, according to BitStamp.
“Although US equities have retraced, Bitcoin has displayed resilience. It remains uncertain whether this is a sign of crypto lagging behind or showcasing relative strength,” added Kooner.