ECB Cautions That Fluctuations in Tech and Crypto May Trigger a Market Crash Similar to 2000

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ECB Cautions That Fluctuations in Tech and Crypto May Trigger a Market Crash Similar to 2000

Bitget-RWA2025/11/24 09:06

By:Bitget-RWA

- ECB warns U.S. tech and crypto volatility risks triggering a 2000-style market crash, citing sharp asset corrections and AI-driven valuation fragility. - ECB officials stress central banks must retain rate-cut flexibility amid rising risks, as crypto outflows and equity inflows highlight market divergence. - JPMorgan analysis flags crypto panic-selling risks spilling into broader systems, while MSCI warns a 63% sector collapse could follow AI confidence loss. - ECB and BIS caution stablecoin growth threa

The European Central Bank (ECB) has issued a warning about escalating threats to global financial stability, cautioning that abrupt downturns in U.S. tech shares and the cryptocurrency sector could spark a crisis similar to the dot-com crash of 2000. Alvaro Santos Pereira, a member of the ECB's Governing Council and head of Portugal's central bank, stressed the importance of central banks maintaining the ability to swiftly lower interest rates should turmoil arise. His comments come at a time when

the S&P 500 is nearing its sharpest drop

since April, and cryptocurrencies have tumbled alongside stocks amid increased market turbulence.

ECB Cautions That Fluctuations in Tech and Crypto May Trigger a Market Crash Similar to 2000 image 0

The ECB's worries go beyond just the markets.

JPMorgan

experts observed that November saw a notable split in investor actions, with $4 billion pulled from crypto ETFs—primarily by individual investors—while equity ETFs attracted $96 billion in new funds. This trend highlights a rising risk of panic-driven selloffs in crypto, which could ripple through the wider financial system

as market analysts suggest

. At the same time, the ECB’s Financial Stability Review pointed out weaknesses in U.S. tech stock prices, with

MSCI

scenario projections indicating that

if confidence in AI-fueled growth falters

the semiconductor and cyclical industries could see values plunge by as much as 63%.

Central banks are also contending with the expansion of stablecoins, which have come under scrutiny for their potential to disrupt established financial systems. Lorenzo Bini Smaghi, a former ECB executive board member, warned that Europe’s slow progress in launching euro-based stablecoins

could mean losing ground

to dollar-backed digital tokens, possibly weakening the ECB’s influence over monetary policy. This view is echoed by ECB Vice President Luis de Guindos, who recently pointed to “heightened” risks from geopolitical instability and “volatile currency movements” stemming from the U.S.

De Guindos cautioned

that elevated debt in developed nations, combined with concentrated exposure in stock markets, could intensify vulnerabilities.

The Bank for International Settlements (BIS) has voiced similar concerns, warning that

eroding trust in stablecoins

could prompt mass sell-offs of U.S. Treasuries, reminiscent of the 2008 financial meltdown. Although Coinbase’s chief policy officer argued that stablecoins are safer than traditional banks due to their backing by short-term government securities, central banks remain cautious about the systemic dangers posed by their rapid expansion.

With markets awaiting ECB President Christine Lagarde’s forthcoming address,

investors are watching closely

to see if officials will focus on keeping rate policy flexible or move to tighten oversight in order to contain contagion risks. The ECB’s prudent approach to inflation and interest rates—which are expected to stay steady through 2026—has lent some support to the euro, though the EUR/USD rate dipped as traders factored in a

69% probability of a Fed rate reduction

in December.

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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