While in respect to the short-term volatility and long-term appreciation potential, based on the current live exchange rate and market performance of btc to eur, Bitcoin seems quite strong relative to the euro. Until 12:00 UTC as of October 16, 2024, the exchange rate of Bitcoin versus the euro was 28,500 euros, which is a growth of 37% since the beginning of the year. Conversely, the euro fell 4.2% against the US dollar this year (as a result of the delayed effect of the European Central Bank’s interest rate hikes), indirectly adding to the nominal value of Bitcoin denominated in euros. The trading volume of Coinbase’s BTC/EUR pair on a daily basis averaged 180 million euros, with the spread remaining constant at 0.05% (buy one for 28,490 euros, sell one for 28,505 euros). The liquidity depth (aggregate value of the top five open orders) was over 6,000 BTC, such that large trades could have less than 0.3% slippage. For comparison, the eurozone M2 money supply grew 3.1% year-on-year (below the 1.8% year-over-year rate of inflation of Bitcoin), and fiat money’s decline in purchasing power has driven money into crypto assets – European retail investors’ allocation of Bitcoin jumped to 6.7% in 2024 (4.2% in 2023).
Market volatility reveals the risk premium of Bitcoin. The 30-day annualized volatility of Bitcoin is 65% that is much higher than the 8% exchange rate of the Euro against the US dollar. But high volatility is also being rewarded by high returns – in 2024, the rate of return of Bitcoin in euros was on average 89%, significantly higher than for eurozone government bonds (the yield of German 10-year government bonds was 2.4%) and the stock market (the rate of return of the Euro Stoxx 50 index was 11%). On the derivatives market, the average daily funding rate for BTC/EUR perpetual swaps on BitMEX is at 0.03%, in which longs have a portion of 62% and open interest is 1.4 billion euros (up by 120% since the beginning of the year), indicating that bets placed by leveraged funds in Bitcoin continue to grow in power. Also, after the European Central Bank had increased interest rates 25 basis points during September of 2024, Bitcoin rose 3.2% only 24 hours after the news was put out, while the euro fell 0.8% versus a currency basket showing the higher safe-haven attribute of Bitcoin as an anti-curse to inflation.
Institutional ownership and on-chain data provide solid confirmation. Glassnode reports that the number of eurozone addresses holding over 1,000 BTC has increased from 1,200 in 2023 to 1,650 in 2024 (37.5% increase) and that such “whales” control 18.3% of circulation (approximately 3.5 million BTC). In the meantime, the European-compliant cryptocurrency funds’ asset management size (such as CoinShares’ BTC EEUR) reached over 5.4 billion euros with an average daily net inflow of 23 million euros, accounting for 29% of the overall inflow of Bitcoin ETFs globally. As the btc to eur exchange rate went over 28,000 euros, the proportion of profit-making on-chain addresses reached 71% (19,800 euros median price), while turnover in long-term holders was only 0.8% (mean daily), far less than the 2.1% average eurozone stock turnover rate, suggesting that buyers held Bitcoin more often for reasons of offsetting fiat depreciation.
Macroeconomic policies have overextended the euro’s weakness. The EU’s CPI is projected to rise by 3.4% year-on-year in 2024, with core inflation persistently holding at 4.1%. This has forced the European Central Bank to maintain interest rates high (4.25%), which has led to rising corporate funding costs (the eurozone average corporate bond yield is 5.2%) and a declining rate of economic growth (IMF GDP growth forecast in 2024 is 0.7%). On the other hand, the Bitcoin network’s network power will double to 650 EH/s in 2024 (a 45% year-on-year increase) and with the additional security, institutions are arriving to increase their stake – Commerzbank’s 23,000 BTCs (approximately 6.5 billion euros) through custody are 41% of its digital asset portfolio. In addition, the energy crisis brought about by the Russia-Ukraine conflict has prompted European investors to transfer 3.2% of their gold reserves into Bitcoin (according to the World Gold Council), as the 90-day correlation between crude oil prices and Bitcoin has risen from -0.2 to 0.35 (the euro-crude oil correlation is -0.5), making it more valuable as a hedge against energy inflation.
Technical indicators and sentiment are diverging. The weekly Bitcoin RSI is 58, not in the overbought area, while the euro against the US dollar RSI has dropped to 32, close to the oversold critical level. According to Santiment’s social sentiment, the intensity of conversation of Bitcoin within the German-speaking community increased by 47% in 2024, and only 12% of that was negative (negative sentiment towards the economic crisis in the eurozone accounted for 34%). But Bitcoin’s strength is regulatory risk – the EU’s Crypto Markets Act (MiCA) requires exchanges to implement more rigorous Proof of Reserves (PoR) from 2025, which might create a near-term liquidity drought (with an anticipated 15% increase in compliance costs).
in brief, though the short-term btc to eur price fluctuations are determined by the nature of risky assets, the advantages of Bitcoin in anti-inflation, decentralization and technological progress (such as the Taproot upgrade which improves the efficiency of transactions by 30%) allow it to act better in the fiat currency weak cycle. Bloomberg predicts that if the eurozone inflation rate remains above 3% in 2025, the exchange rate of Bitcoin to the euro can exceed 35,000 euros, and the annualized volatility can approach 50%-55%, becoming the mainstream choice for European investors to hedge against currency devaluation.