Bitcoin starts May strong
Financial markets remain under the grip of significant uncertainties. Oil prices, interest rate expectations, and geopolitical tensions are pulling in different directions. This makes it challenging for investors to determine direction. In such an environment, one would expect risk to be avoided, but bitcoin presents a different picture. Against this backdrop, a debate has emerged about the future of stablecoins in Europe, where regulations determine whether the market can grow or simply disappear. More on that in this edition of the Market News.
Market update
The global stage remains turbulent. Since the outbreak of the conflict with Iran at the end of February, the oil market has been dictating the course of financial markets. The price of a barrel of Brent oil rose to well above 110 dollars, driven by stalled negotiations and waterways. This leads to nervousness, as higher energy prices could reignite inflation.
These inflation concerns are also reflected in the policy of the U.S. central bank. The policy rate remained unchanged this week, but the underlying picture has changed. Earlier, investors were counting on rate cuts in 2026, but now the market is anticipating increases. The division within the Fed speaks volumes: four officials voted against the rate decision. This has not happened in decades and indicates uncertainty about the direction.
At the same time, major tech companies are showing that capital is still flowing freely. Companies like Google, Amazon, and Microsoft are investing tens of billions in AI, resulting in strong growth in their cloud services. But there are uncertainties there as well. For example, Meta was penalized by investors who are questioning whether and when these investments will pay off.
Against this backdrop, it is notable that bitcoin is holding strong. Just look at the graph below, which compares the performance of seven assets since the Iran conflict began. Bitcoin (black, +25%) only trails oil (blue, +51%) above it. Bitcoin leaves large and small stock and tech indices behind with five-digit figures. Gold (light blue) has the worst performance, at -13.5%.
If interest rate expectations continue to rise, that could again put pressure on risky markets. If bitcoin remains resilient despite this, it is an indication that its role within portfolios is shifting. In any case, bitcoin is off to a strong start this month.
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Euro stablecoins need better regulations
You may have heard of the Laffer curve. It describes the theoretical relationship between tax rates and tax revenues. Zero percent tax yields nothing, but 100 percent tax does not either; then no one would work anymore. Somewhere in between lies the point at which the yield is maximized. If you go beyond that? Then the activity you were trying to stimulate disappears.
According toĀ a new report on European stablecoin regulations, this is precisely where MiCA, the European legislation for regulating crypto, has gone wrong.
The criticism comes from within. Ulrich Bindseil, a long-time influential economist within the ECB, co-authored the report with Erwin Voloder from Blockchain for Europe.
The authors apply the Laffer curve to regulation. Without rules, you get risks and abuse. With overly strict rules, something else happens: the activity you wanted to regulate simply shifts. Then you have rules, but no market anymore.
And this is particularly sensitive for stablecoins. They operate on public networks and are inherently global. Companies can relatively easily choose where to establish themselves. If Europe makes it too difficult, the activity shifts to the U.S. or far beyond. That consequence is tangible, as euro stablecoins play hardly any role on the global stage; less than one percent of the total volume. That is disproportionate to the economic size of the eurozone.
According to the authors, the solution lies not so much in eliminating rules but in adjusting their sharpness. They advocate allowing interest on euro stablecoins so that they can compete with alternatives.
Additionally, they propose broadening the range of permitted reserve assets so that stablecoin issuers can diversify what they hold as collateral. The reporting on this should also be made more risk-based. And issuers should, within clear frameworks, gain access to central bank infrastructure to better manage their liquidity.
Bindseil and Voloder are clear: MiCA must be made workable for stablecoins. Otherwise, Europe will be left with neatly regulated frameworks... for a market that largely operates outside of them.
In other news
Taiwan investigates inclusion of bitcoin in national reserves. A parliamentarian has presented a report on thisĀ to the prime minister and the central bank, proposing to transfer part of the foreign reserves to bitcoin. The report points to the risks of (too) strong dependence on the U.S. dollar and mentions bitcoin as a geopolitically resilient addition. The central bank had previously raised concerns due to volatility and practical feasibility but is open to further research.
Curve wants to settle damage from hacks in a decentralized manner, as an alternative to orchestrated bailouts. Curve is a decentralized stablecoin exchange. The proposalĀ makes it possible to wrap problem positions as tokens and make them tradable, allowing investors to determine at what price they enter or exit. The model has similarities to existing practices in the traditional financial sector, where problem loans are sold to specialized parties. Curve brings that principle on-chain; a new way to deal with losses within DeFi.
New bitcoin proposal protects against quantum computers. So-calledĀ PACTs work like a sealed declaration: users now confirm that they own certain private keys without making them public. If bitcoin ever needs to freeze assets as a precaution, that proof can be used to unlock those assets. The approach offers an alternative to drastic measures where holders must actively move their assets. Quantum safety has risen high on the agenda among bitcoin developers in recent months.
Creators on Facebook and Instagram can be paid in stablecoin USDC. Four years after Meta's own stablecoin Libra was stranded under political pressure, the company is finally working with a digital dollar. So-called creators can choose Circle's USDC for their payments. Meta has quietly launched the integration with Solana and Polygon. In the background, the company uses Stripe's infrastructure. āWe aim to offer the most relevant payment methods,ā said a spokesperson. āThatās why we are exploring how stablecoins fit into our offerings.ā
Satoshi Radio: TheĀ latest episode of Satoshi Radio looks back at Bitcoin 2026, the Bitcoin conference that took place in Las Vegas. The American financial sector and politics were well represented. Tether is also discussed. It aims to merge multiple companies into a single Bitcoin empire. Additionally, the Dutch wealth tax is on the agenda following negative attention in the international media. A thorough market update concludes the episode, focusing on the influence of geopolitics and macroeconomics on the Bitcoin price.
This article is for informational purposes only and does not constitute a marketing communication or recommendation. None of the content herein should be considered as investment advice or a substitute for it. Bitvavo makes no guarantees regarding the accuracy or completeness of the provided information. Investments involve risks. There is a possibility of losing your entire invested capital.