Risk assets fell on Thursday as China cut interest rates for the second time in a week raising concerns about instability in the world's second-largest economy.
Bitcoin, the top cryptocurrency by market value, fell 3.4% on the day to $64,274 and ETH fell more than 8% to $3,178, dragging the broader altcoin market lower.
Source: Coin360
In stock markets, Germany's DAX index, France's CAC and the euro zone's Euro Stoxx 50 fell more than 1.5% and Futures Contract tied to the Nasdaq 100 technology index also fell slightly.
This morning, the People's Bank of China (PBoC) suddenly announced a cut in one-year medium-term lending interest rates from 2.5% to 2.3%, injecting 200 billion yuan ($27.5 billion). la) liquidation into the market, marking the largest drop since 2020.
The move, along with cuts to other borrowing rates earlier this week, shows the urgency among policymakers to boost growth after their recent third plenary session failed to brings much hope for economic stimulus. Data released earlier this month showed that China's economy saw annual growth of 4.7% in the second quarter, well below estimates of 5.1% and slower than expected. 5.3% of the first quarter.
“Futures Contract stabilized after yesterday's bloody session that shook sentiment across all asset classes,” said Ilan Solot, senior global strategist at Marex Solutions. “The PBoC's unexpected decision to cut interest rates only adds to the sense of panic.”
Marex Solutions is a division of the global financial platform Marex, which specializes in creating and distributing customized Derivative and issuing structured products linked to cryptocurrencies.
Solot noted that the “increasingly steepening US Treasury yield curve” is a threat to risk assets, including cryptocurrencies.
The yield curve steepens as the spread between long-term and short-term bond yields increases. This month, the spread between 10-year and 2-year Treasury yields increased 20 basis points to -0.12 basis points (bps), mainly because the 10-year yield had higher stability.
History shows that the phenomenon of the yield curve sloping back from a negative state (or negative spread) often occurs at the same time as risk aversion.
“For me, the biggest concern is the shape of the US bond yield curve, which continues to steepen. The 2-year and 10-year curves not only inverted -12bps, compared to -50bps just last month. This change shows that long-term (10-year) interest rates are rising faster than short-term (2-year) interest rates, contributing to the steepening of the yield curve,” Solot said, emphasizing that is a sign that markets expect the Fed to cut interest rates but see Dai inflation and expansionary fiscal policy as growing risks.
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According to Coindesk
