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Renewed bias for rate cuts could ease financial conditions, offering bullish cues to risk assets, including bitcoin.
By James Van Straten, Omkar Godbole|Edited by Omkar Godbole
Mar 6, 2025, 9:35 a.m. UTC
What to know:
- The European Central Bank (ECB) is anticipated to lower interest rates to 2.65%, despite a significant European debt sell-off.
- This expected easing could contribute to the ongoing global liquidity easing, potentially providing bullish signals for risk assets, including cryptocurrencies.
The European Central Bank (ECB) is expected to cut interest rates on Thursday to 2.65%, continuing its easing from a 4.5% peak amid increased volatility in bond markets.
The expected easing comes as markets reprice at least three Fed rate cuts for 2025 and Germany and China take the fiscal easing route to shore up their respective economies.
STORY CONTINUES BELOW
In other words, the ECB’s impending easing could only add to the ongoing global liquidity easing, offering bullish cues to risk assets, including cryptocurrencies.
“Overall, liquidity conditions are supportive and rising, to keep risk and crypto pushing higher, despite this recent correction on growth concerns,” founders of the newsletter service LondonCryptoclub said in Thursday’s edition.
The European Union’s headline inflation is still not at the central bank’s target of 2%, which raises concerns about the impending rate cut and its impact on the European bond markets.
Germany’s 10-year bund has climbed to 2.8%, its highest since 2011, pricing in more supply in the wake of Germany’s fiscal stimulus announcement. The spike has narrowed the U.S.-German yield spread in favor of the euro, driving the dollar index lower. That, coupled with the tariff threat, has the DXY index falling faster than in President Trump’s first term.
The U.K. bond yields have also topped those of the U.S. Meanwhile, Japan’s 10-year bond has surpassed 1.5%, a 17-year high, as the Bank of Japan struggles to rein in inflation after three rate hikes after almost ten years of negative interest rates.
Volatile bond markets can cause financial tightening, forcing investors to scale back exposure to riskier assets.
James Van Straten is a Senior Analyst at CoinDesk, specializing in Bitcoin and its interplay with the macroeconomic environment. Previously, James worked as a Research Analyst at Saidler & Co., a Swiss hedge fund, where he developed expertise in on-chain analytics. His work focuses on monitoring flows to analyze Bitcoin’s role within the broader financial system.
In addition to his professional endeavors, James serves as an advisor to Coinsilium, a UK publicly traded company, where he provides guidance on their Bitcoin treasury strategy. He also holds investments in Bitcoin, MicroStrategy (MSTR), and Semler Scientific (SMLR).
Omkar Godbole is a Co-Managing Editor on CoinDesk’s Markets team based in Mumbai, holds a masters degree in Finance and a Chartered Market Technician (CMT) member. Omkar previously worked at FXStreet, writing research on currency markets and as fundamental analyst at currency and commodities desk at Mumbai-based brokerage houses. Omkar holds small amounts of bitcoin, ether, BitTorrent, tron and dot.
