Risk assets fell on Thursday as China’s second interest rate cut in a week fueled concerns about instability in the world’s second-largest economy.

Bitcoin (BTC), the leading cryptocurrency by market cap, has fallen almost 2% since midnight to around $64,000, and ether (ETH) is down more than 5%, dragging the broader altcoin market lower. The CoinDesk 20 Index (CD20), which measures the broader crypto market, lost 4.6% in 24 hours.

In equity markets, Germany’s DAX, France’s CAC and the euro zone’s Euro Stoxx 50 were down more than 1.5%, and futures on the tech-heavy Nasdaq 100 were down 3% on Wednesday. It is trending slightly lower after its decline of 100,000,000, the data is given by Investing.com.

Early Thursday morning, the People’s Bank of China (PBoC) unexpectedly cut the one-year medium-term lending mechanism interest rate from 2.5% to 2.3% and injected 200 billion yuan ($27.5 billion) of liquidity into the market. did. This represents the largest reduction since 2020.

The move, along with similar cuts in other borrowing rates earlier this week, shows the urgency for policymakers to support growth after little promising stimulus was offered at the last plenum.

Data released earlier this month revealed that the Chinese economy grew 4.7% on an annual basis in the second quarter, much weaker than the 5.1% predicted and slower than the 5.3% in the first quarter.

“Equity futures are stable following yesterday’s bloody session that shook sentiment across all asset classes,” Ilan Solot, senior global strategist at Marex Solutions, said in a note shared with CoinDesk.

“PBoC’s surprise interest rate cut decision only increased the sense of panic.” Marex Solutions is a division of global financial platform Marex, specializing in creating and distributing customized derivatives products and issuing crypto-related structured products.

Solot cited the ongoing “steepening” of the U.S. Treasury yield curve as a threat to risky assets, including cryptocurrencies, CoinDesk reported from earlier this month.

The yield curve steepens when the difference between long-term and short-term bond yields increases. This month, the spread between 10-year and 2-year Treasury yields widened 20 basis points to -0.12 basis points, with 10-year yields generally being stickier.

The so-called reversal, or steepening again from a negative spread, has historically coincided with periods of risk aversion.

“The biggest concern for me is the shape of the US yield curve, which continues to steepen,” Solot said. The 2 and 10 year curve is only -12 basis points inverted, last month it was -50 basis points. “Recent movements have been driven by rising long-term yields and declining short-term yields,” he said.

This means markets expect the Fed to cut interest rates but see stickier inflation and expansionary fiscal policy as increasing risks, Solot said.