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Polkadot Latest Updates: ECB Raises Concerns: Cryptocurrency and Stock Market Downturns Resemble Dot-Com Bubble Threats

Polkadot Latest Updates: ECB Raises Concerns: Cryptocurrency and Stock Market Downturns Resemble Dot-Com Bubble Threats

Bitget-RWA2025/11/23 20:30
By:Bitget-RWA

- ECB warns U.S. equity/crypto corrections threaten stability, urging central banks to retain rate-cut flexibility amid market volatility. - JPMorgan links crypto ETF outflows to retail investor behavior, noting $4B November sales contrast with $96B equity ETF inflows. - U.S. Treasury downplays recession risks, citing 2026 growth optimism despite shutdown impacts and services-driven inflation. - MSCI highlights tech valuation risks akin to dot-com era, while DeFi faces $12B liquidity crisis with 95% capita

The European Central Bank has issued a warning about increasing threats to financial stability, cautioning that a downturn in U.S. stock markets and the cryptocurrency industry could create major risks.

, who also serves as the governor of the Bank of Portugal, stressed the importance of central banks remaining adaptable to unexpected events. He stated, "If another shock or crisis occurs, central banks need to have enough resources to lower interest rates decisively and support the economy." His comments come during a period of market turbulence, with the S&P 500 heading for its largest decline since April and digital assets falling alongside other risky investments.

According to JPMorgan analysts, the recent correction in the crypto market has been largely driven by retail investors. In November, retail traders sold approximately $4 billion worth of spot

and ETFs, surpassing the previous record outflows seen in February. This wave of selling stands in stark contrast to the strong inflows into equity ETFs, which have so far this month. The analysts pointed out that while crypto-focused traders played a role in October’s downturn by reducing leverage in futures, the November drop is mainly due to non-crypto investors using ETFs. "Therefore, it would be incorrect to interpret the selling of crypto ETFs as a sign that retail investors are becoming broadly negative on risk assets, including stocks," the report explained.

Polkadot Latest Updates: ECB Raises Concerns: Cryptocurrency and Stock Market Downturns Resemble Dot-Com Bubble Threats image 0

At the same time, Treasury Secretary Scott Bessent

for the U.S. economy, despite the $11 billion impact from the recent government shutdown. He attributed rising prices to the services sector rather than tariffs from the Trump administration and expressed confidence in economic growth for 2026, citing lower interest rates and tax reductions. "I am extremely optimistic about 2026. We have created the conditions for robust, non-inflationary economic growth," Bessent told NBC. His outlook is echoed by National Economic Council Director Kevin Hassett, who forecasted a "blockbuster" year in 2026 but acknowledged there could be a "hiccup" in late 2025 due to the lingering effects of the shutdown.

The ECB’s worries go beyond cryptocurrencies and stocks, extending to the risks of market concentration.

pointed out weaknesses in U.S. technology stock valuations, drawing comparisons to the dot-com bubble. With information technology and communication services now making up record portions of the MSCI USA Index and price-to-earnings ratios far above historical norms, a loss of faith in AI-driven growth could spark a rapid sell-off. In a simulated stress scenario, global semiconductor and cyclical sectors could fall by as much as 63%, while defensive areas like consumer staples and healthcare could gain up to 12%.

Adding to these challenges is a liquidity crunch in decentralized finance (DeFi), where

persists, with 95% of available capital remaining idle. This lack of utilization reveals structural problems in DeFi markets, even as traditional financial systems undergo their own adjustments. Pereira’s cautions highlight how these risks are interconnected, urging policymakers to stay alert for sudden disruptions. "We must remain aware of these short-term risks," he said, .

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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