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Product in the Spotlight: Bitcoin Euro

Dubbed the ‘Single Currency’ at conception, the euro has been around since 2002. Its creation mechanisms are similar to that of any other fiat currency, including being regulated by the European Central Bank (ECB), and being impacted by interest rates. Bitcoin, on the other hand, is a decentralised currency that’s highly volatile and hard to regulate. While regulatory bodies are indeed circulating, the crypto space remains largely ungoverned.

Interestingly, despite its widespread use, the euro accounts for only 64% of all currency trading, while the US dollar is at almost 100%. Bitcoin has the power to act as the common ground between the EUR and USD, being a money transfer protocol, while also being a currency. With the Ukraine crisis, Greek debt, Brexit and more factors contributing to the political instability of the Eurozone, it remains to be seen if Bitcoin is able to benefit the EU.

Factors Affecting Bitcoin/Euro Trading Pair

If you are trading the BTC/EUR pair, you must know the factors driving the price of the euro. The Eurozone has 17 members, of which only a few are large enough to make a substantial impact on the currency. Germany, France, Italy and Spain are the countries to look out for.

  1. Prices and Inflation: CPI is the key measure of inflation in the Eurozone. However, the CPI itself doesn’t affect the euro as much as the CPI Flash Estimate and German Preliminary CPI, released two weeks before the CPI. The inflation level forms the basis for monetary policies by the ECB.
  2. Monetary Policy: The European Central Bank and its decisions regarding interest rates have significant impact on the euro. The ECB press releases and conferences are important events to follow. A higher interest rate is usually associated with higher currency value.
  3. GDP Release: The overall economic output of the Eurozone affects the value of the euro. The GDP figure is released in the form of quarterly reports, released two months from the quarter end.
  4. Balance of Payment: A current account deficit will mean more financial capital leaving the country than the amount entering it, which is bad for the currency. Germany and France are the two largest exporters in this area. So, traders should look into the accounts of these countries.

Over the past year, the highest value of XBT/EUR has been 16546.29 in December 2017, a period coinciding with the launch of CBOE Bitcoin futures.

Bitcoin/Euro: Amidst Political Crisis

On May 21, 2018, the euro moved down to a five-month low against the US dollar, owing to significant Italian political drama.

The Italian rightist League party, in collaboration with the 5-Star Movement, agreed to a governing accord, to reduce taxes and increase welfare spending. The accord will likely affect the Stability and Growth Pact, a document that represents fiscal responsibility within the Eurozone. There are significant doubts as to whether any move to abandon the single-currency system will even get past the President’s constitutional veto.

If Rome doesn’t keep its commitments, the stability of the Eurozone would be affected. Even Germany doesn’t look too keen on agreeing to Italy’s spending plans. This Italian economic risk will continue to put pressure on the performance of the euro.

A lot now depends on political stability. The BTC/EUR pair will also be affected if the European Union decides to unleash new cryptocurrency regulations, similar to what they hinted at earlier in 2018. The countries have been clear on the fact that they do not want Bitcoin to be misused by criminals for laundering money. To achieve this, the European Parliament voted in favour of stricter regulations for crypto exchanges in April 2018.

For now, there is a lack of uniform policies regarding cryptocurrencies in Europe. Individual member-states have so far applied their own regulations but there are no blanket rules to consider.

The only coordinated move has been the signing of the Declaration on the Establishment of a European Blockchain Partnership. Earlier in April 2018, 22 countries agreed to cooperate in the launch of EU-wide blockchain applications. Some of the countries have partially legalised cryptocurrencies, in order to benefit from tax gains related to crypto transactions.

Any future change to crypto laws and regulations will affect the BTC/EUR pair.