According to CoinDesk, risk assets declined on Thursday following China's second interest-rate cut within a week, raising concerns about instability in the world's second-largest economy. Bitcoin, the leading cryptocurrency by market value, dropped nearly 2% to around $64,000, while ether fell over 5%, pulling the broader altcoin market down. The CoinDesk 20 Index, which measures the broader crypto market, lost 4.6% in 24 hours.

In equity markets, Germany's DAX, France's CAC, and the eurozone's Euro Stoxx 50 fell over 1.5%. Futures tied to the tech-heavy Nasdaq 100 were slightly lower after the index's 3% decline on Wednesday, according to Investing.com. Early Thursday, the People's Bank of China (PBoC) announced an unexpected cut in its one-year medium-term lending facility rate to 2.3% from 2.5%, injecting 200 billion yuan ($27.5 billion) of liquidity into the market. This is the largest reduction since 2020.

The move, along with similar reductions in other borrowing rates earlier this week, indicates urgency among policymakers to support growth after the recent third plenum offered little hope of a boost. Data released earlier this month showed China's economy expanded by 4.7% in the second quarter at an annualized pace, weaker than the estimated 5.1% and slower than the first quarter's 5.3%.

Ilan Solot, senior global strategist at Marex Solutions, noted that equity futures remained stable after a volatile session that affected all asset classes. He stated that the PBoC's surprise rate cut added to the sense of panic. Solot also highlighted the ongoing steepening of the U.S. Treasury yield curve as a threat to risk assets, including cryptocurrencies. The yield curve steepens when the difference between longer-duration and shorter-duration bond yields increases. This month, the spread between 10-year and two-year Treasury yields has risen by 20 basis points to -0.12 basis points, mainly due to persistent 10-year yields.

The de-inversion or re-steepening from inversion has historically coincided with risk aversion. Solot expressed concern about the shape of the U.S. yield curve, which continues to steepen. The 2- and 10-year curve is now -12bps inverted, compared to -50bps last month. Recent moves have been led by rising back-end (10-year) yields and falling short-end ones. This suggests that markets expect the Federal Reserve to cut rates but see persistent inflation and expansionary fiscal policy as growing risks.