Ceasefires, Stablecoins, and the Global Liquidity Chessboard
If you thought summer would bring a lull, think again. This week, markets served up a fresh round of geopolitical drama, digital liquidity headlines, and central bank chess moves. So pour yourself a double espresso or, for those who brunch with style, a grappa and water, no ice… and let’s get into it.
Recap: Where We Left Off (Week 25)
Liquidity, Listings & the September Pivot: What Investors Need to Know Now
Last week, we watched markets regain their footing after oil shocks, with tech leading the bounce and gold holding steady. The Circle IPO was the talk of the digital town, and the Weekly Market Table got a new addition: the Fed’s September rate cut probability. The lesson? In markets, as in brunch, timing and flexibility are everything.
Markets, like a good brunch, are all about momentum and patience. Sometimes you wait for the next course; sometimes you get surprised by what’s served. Last week reminded us to keep an eye on the kitchen… and the central banks.
This Week: Ceasefires, Stablecoin Surge, and the Fed’s Slow Dance
US & Global Equities:
S&P 500 and Nasdaq continued their upward march, as investors shrugged off earlier jitters and focused on the prospect of easier money ahead.
FTSE 100 and DAX (Germany) were steady, with European markets digesting both ECB signals and the growing presence of digital dollars on their turf.
Gold edged higher, still flirting with record territory as a hedge against uncertainty.
Bitcoin held near highs, buoyed by the liquidity narrative and regulatory clarity in the US.
Macro & Policy:
Israel-Iran War: Ceasefire holds after 12 days of intense conflict, with Iran’s nuclear program heavily damaged and both sides on high alert, region remains tense, not at peace.
Oil Markets: Oil spiked 13% on conflict, but prices have since retreated as supply disruptions eased and the ceasefire held; war premium short-lived, but risk remains.
US Treasury yields inched lower as markets priced in September’s expected rate cut.
Fed officials confirmed the pivot: two 0.25% rate cuts are now projected for 2025, with the first in September… a subtle but important shift from last week’s “wait and see.”
Europe & UK: The ECB is holding steady, but the euro’s recent surge (+12.88% YTD vs. USD) is fuelling euro-backed stablecoin growth and cross-border capital flows.
China: Manufacturing PMI remains stuck in contraction, but optimism is building on the back of digital asset adoption and tariff thaw hopes.
Sometimes, the market’s most important move is the one it’s about to make. This week, investors are positioning for a world where liquidity is digital, global, and (thanks to the Fed) about to get a little bit cheaper.
Weekly Market Table
What’s Pertinent This Week?
Israel-Iran War: Ceasefire and Fragile Calm: After 12 days of intense conflict, a US- and Qatar-brokered ceasefire took hold. Israel’s strikes caused “enormous damage” to Iran’s nuclear program and eliminated top IRGC Aerospace Force commanders. The IAEA confirms Fordow is “no longer operational,” but experts warn Iran’s nuclear ambitions are likely delayed, not destroyed. Iran’s missile retaliation was limited, and the ceasefire (though tense) has held. Oil’s war premium has faded, but the region remains on a knife edge, with both sides ready to resume hostilities if provoked.
Global Growth Gears Down: The World Bank and other forecasters have cut 2025 global growth projections to just 2.3%; the slowest pace since 2008 outside of recessions. Nearly 70% of economies have seen their outlook downgraded this year, with trade tensions, policy uncertainty, and sluggish investment weighing on both advanced and emerging markets.
Trade Tensions and Policy Uncertainty: Heightened tariffs, especially between the US and China, are driving up costs and distorting supply chains. The US current account deficit hit a record as companies rushed to import ahead of new tariffs, while Europe is navigating its own trade and currency challenges. The 90-day US tariff pause is set to expire soon, keeping markets on edge for another round of trade drama.
Consumer and Business Sentiment: US consumer confidence deteriorated in June, with households more cautious about the outlook for jobs and business conditions. In the UK, factory orders posted their sharpest drop since January, and expectations for selling prices cooled. China’s manufacturing PMI remains in contraction, though recent trade agreements have provided a bit of relief.
Central Banks: Easing, but Carefully: The Fed is still expected to cut rates in September (now a 71% probability), but is treading cautiously given sticky inflation and tariff risks. The ECB cut again in June but signalled it may be near the end of its cycle, while the BoE held steady but may be forced to act if the UK slowdown deepens. Diverging monetary policy is adding to currency volatility and cross-border capital flows.
Stablecoin and Digital Liquidity Expansion: Meanwhile, the stablecoin story is quickly becoming a global liquidity story. USDC and other regulated stablecoins are gaining ground in Europe as MiCA rules bite, daily on-chain transfer volumes now rival PayPal, and stablecoin reserves are quietly becoming a shadow force in government debt markets. Regulation is catching up, and the “picks and shovels” of digital finance are increasingly central to global capital flows.
Safe Havens Hold Steady: Gold continues to edge higher, and Bitcoin remains near record highs, as investors hedge against both policy missteps and geopolitical risk.
This week, the broader message is clear: the world economy is slowing, trade and policy risks are rising, and liquidity (whether digital or traditional) remains the lifeblood of markets. For investors, the challenge is to stay diversified and alert, balancing the new opportunities in digital finance with the realities of a more fragile global growth environment.
Private Equity’s Macro Insights
The Liquidity Wave: Why Stablecoins Matter for Debt Markets
Introduction
Why am I so focused on stablecoins? Last week I may have sounded over-exuberant about the Circle IPO, but here’s the real reason: stablecoins aren’t just another crypto fad!
They’re fundamentally changing how governments fund themselves and how liquidity flows through the system. By law, every $100 of stablecoin (like USDC) must be backed by $100 in short-term government debt or cash. In contrast, banks now hold as little as $1–$5 of Treasuries for every $100 of assets. That means $100 in new stablecoins = $100 in new demand for Treasuries, while $100 in new bank deposits = almost nothing for government debt.
As China and Japan step back from buying US debt, stablecoins are quietly filling the gap, providing daily, transparent liquidity, and doing the job banks used to do, but with far more direct impact on the Treasury market.
Stablecoins: From Crypto Niche to Financial Backbone
Stablecoins have leapt from crypto curiosity to mainstream fintech catalyst in 2025. Dollar-backed tokens like USDC and USDT now exceed $250 billion in circulation, with transaction volumes rivalling the likes of PayPal. Circle’s blockbuster IPO (shares up nearly 6× since debut) wasn’t just a crypto event; it was a wake-up call for traditional finance that digital liquidity is here to stay.
How do stablecoins work? They’re digital tokens pegged to reserve assets (usually the US dollar; a fiat currency, meaning government-issued money not backed by gold). The most popular, like USDC, are fully backed by cash and short-term Treasuries, making them a stable, transparent bridge between the old and new financial worlds.
The Profitability Cycle: Rate-Driven, Countercyclical, and Now Institutional
Circle’s business model is elegantly simple: mint USDC for every dollar received, invest those reserves in T-bills, and pocket the interest. When short-term rates are high, profits soar—making Circle a rare counter-cyclical play to risk assets. With $60 billion in USDC and rates at 5%, Circle’s annual gross interest income can run into the billions.
But the real story is scale and influence. Stablecoins are now a shadow primary dealer, providing liquidity to governments by parking billions in Treasuries. The velocity is staggering: daily on-chain stablecoin transfers now rival PayPal, and settlement for cross-border deals is moving from T+3 to nearly T+0.
Regulation: Clarity, Confidence, and the GENIUS Act
Regulatory momentum is catching up. The US GENIUS Act and Europe’s MiCA rules now require full reserve backing, monthly audits, and strict compliance for stablecoin issuers. This clarity is a magnet for institutional capital, with Q1 2025 seeing a record 7.5% of all VC deals go to stablecoin and payment startups, surpassing even the 2021 cycle peak. The market is maturing, and the bar for compliance is rising.
The Picks & Shovels Opportunity: Toll Booths for the Digital Dollar
The best way to play the stablecoin surge? Own the rails. Exchanges, custodians, payment processors, and compliance analytics are the “picks and shovels” of this new era; businesses with recurring revenue, less headline risk, and a front-row seat to the liquidity revolution. As Circle’s IPO and the GENIUS Act show, the future of liquidity is digital, regulated, and full of opportunity for those who know where to look.
Interest Rate Outlook for September: What It Means for Private Equity
This week, I have added the market-implied probability of a Fed rate cut at the September 17 FOMC meeting to our Weekly Market Table. As of now, futures markets are pricing in a roughly 71% chance of a rate reduction at that meeting, up from about 64% last week. This reflects growing market confidence that the Fed will shift from its current “higher for longer” stance toward a more accommodative policy, as inflation pressures ease and economic growth shows signs of moderation.
For private equity, the potential for a September rate cut is highly significant. Lower interest rates reduce the cost of borrowing, making it cheaper for funds to finance new deals and for portfolio companies to refinance existing debt. This can boost deal activity, increase valuations, and make exit strategies (such as IPOs and trade sales) more attractive. At the same time, a more accommodative monetary policy can increase competition for deals, as more capital enters the market seeking yield, potentially leading to higher purchase prices and tighter margins.
However, the prospect of lower rates also brings risks. Increased competition can drive up asset prices and lead to overvaluation, while the availability of cheap debt can encourage excessive leverage. For private equity managers, the key will be to remain disciplined, focusing on operational improvements and value creation rather than relying solely on financial engineering.
Ed’s Final Word
Week 26 was a reminder that the only constant in markets is change, sometimes driven by policy, sometimes by technology, and sometimes by the simple fact that money never sits still for long. For private equity and risk asset investors, the lesson is clear: adapt to the new liquidity landscape, watch the policy signals, and don’t be afraid to pivot when the opportunity arises.
As always, these are the thoughts and opinions of mine and no one else’s, not even Beaufort Private Equity Limited. Please do your own research before making investment decisions and reach out to your Beaufort relationship manager if you have any queries or follow-ups.
Further Reading:
OMFIF – Private versus public: US and Europe diverge over stablecoins
AINVEST – MiCA and GENIUS Act Reshape Crypto Market Shares by 2025
AINVEST – Stablecoin Market Capitalization Surges 17% to $228 Billion in 2025
Europarl – Stablecoins and digital euro: friends or foes of European monetary policy?
Morningstar DBRS – Crude Spike From Israel-Iran War Likely Short-Lived
Week 26, 2025: In markets, the only constant is change … so keep your wits, your watchlist, and your breakfast close at hand. And if you’re feeling adventurous, try that double espresso with a splash of grappa. You might just like it.
