In its latest Financial Stability Review, the ECB notes that the market capitalization of cryptocurrencies exceeded 4 trillion dollars in July for the first time in history, a development attributed to a more favorable regulatory framework as well as growing interest from institutional and retail investors. Although the market’s value has since declined to 3.3 trillion dollars, concerns regarding intense speculative activity persist.
The Bank also observes parallels with the early 2000s, emphasizing that current high valuations—although supported by strong corporate earnings—entail the risk of sudden and non-linear adjustments. The recent increase in volatility in equity markets, according to the ECB, may be a precursor to a shift in investor sentiment.
Particular attention is given to stablecoins, which—though smaller in scale, with a value of approximately 290 billion dollars—play a pivotal role in the digital-asset market. The ECB acknowledges that risks to the euro area are limited; however, it underscores the need for close monitoring due to their interconnectedness with the traditional financial system.
At the same time, the Bank warns that a multitude of factors may weigh on the global economic environment: geopolitical tensions, uncertainty regarding economic policy, the impact of higher tariffs on inflation and growth, and the possibility that investments in technology and artificial intelligence may prove less productive than expected.
As the ECB’s Vice-President, Luis de Guindos, stressed, “Global stock markets have reached new historical highs. Sentiment could change abruptly, not only if growth prospects deteriorate, but also if the profits of technology companies—particularly those related to artificial intelligence—fail to meet expectations.”
