Bitcoin may 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 reduce interest rates by 0.25% to 4.25% on June 6. This rate cut could potentially enhance investor interest in risk assets, such as Bitcoin (BTC), as stated by Jag Kooner, head of derivatives at Bitfinex. Kooner mentioned to Cointelegraph:
These rate cut expectations arise amidst a period of decreasing inflation in Europe. The headline Consumer Price Index (CPI) for May is projected to be around 2.6%, possibly marking the eighth consecutive month of inflation staying below the 3% threshold.
James Wo, founder and CEO of Digital Financial Group, believes that the potential interest rate cut could uplift traditional equity markets and provide Bitcoin with additional upward momentum. Wo stated to Cointelegraph:
Two prominent European stock indexes, the STOXX 600 and DAX 40, saw increases in May along with Bitcoin’s price. The STOXX 600 rose by more than 3.3%, while the DAX 40 climbed over 3.8% in the past 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. However, in an environment driven by economic stimulus, Bitcoin might follow equities markets in an upward trajectory. Kooner mentioned to Cointelegraph:
Despite the lagging equities market in the United States, Bitcoin has shown strong gains this year. While the S&P 500 index has grown by over 11.5% year-to-date (YTD), Bitcoin’s price has surged by 57.6% YTD, according to BitStamp.
“Even though US equities have retraced, Bitcoin has maintained its strength. It remains uncertain whether this is crypto lagging behind or showing relative strength,” added Kooner.