As of October 1, 2025, the data has been updated. The three-digit deficit in Paris’ budget and the loss of the Bank of France will bring the spotlight back to European monetary policy.
Foreign demand for French securities shows signs of tension, increasing the risk of financial fragmentation in the eurozone, and increasing pressure on the state budget will spark debate over the use of the ECB, an unconventional tool that could also affect rare assets such as Bitcoin.
Data collected by our research team and official reports from Bank de France and the IMF show that the tension observed in French government bonds is consistent with an increase in demand for secondary market risk premiums.
Industry analysts point out that in a weak update scenario by foreign investors, yield pressure can amplify the IMF global financial stability report very quickly.
Simply put, important numbers to follow
- Loss Bank and France (BDF): Approximately 7.7 billion euros for 2024, recently reported (Bank of France).
- France’s fiscal deficit 2024: exceeding 168 billion euros, equivalent to 5.8% of GDP (EuroStat).
- Public debt: Approximately 60% of securities are held by foreign investors. This is a signal that highlights the risk of volatility in the presence of renewal flows and market fluctuations (Telegram’s latest news: Balance Sheet reveals $400 million in crypto).
Bank de France: Losses and European context
BDF closed 2024 with a net loss of around 7.7 billion euros. I recently reported it. Following the rate increase cycle, figures are in line with the challenges of other European Central Banks who have seen an increase in interest rates and profits from refinancing operations compared to yields on securities purchased during low-cost periods.
These are primarily accounting losses, which do not hinder central banks’ operational capabilities, but complicate relocations to the states and encourage debates on monetary policy normalization.
Why is deficit important for the ECB?
A deficit equal to 5.8% of GDP ensures that the French government must rely on the ever-growing supply of government bonds.
As highlighted in the comparison of French bonds (OATs) and German levees, a potential slowdown in foreign demand could lead to widening spreads, creating an environment for financial fragmentation in the eurozone.
In this regard, the European Central Bank (ECB) has closely observed. The ECB’s mission is price stability set at 2%, but it has tools like PEPP reinvestment and transmission protection equipment (TPI) introduced in 2022 to deal with moments of stress in the market, acting under harsh conditions.
Possible scenarios (conditioned by data)
- Targeted Pepp reinvestment to stabilize the market in the event of a shock.
- Use of TPIs when fragmentation threatens the proper functioning of monetary policy communication.
- A potential new wave of QE (quantitative mitigation) can only take shape if data on inflation and growth justifies it.
- Liquidity line to banks to avoid unwanted financial tightness.
The most extreme hypotheses such as capital management, redecoration, and defaults currently remain theoretical scenarios without appearing on the institutional agenda.
Market Perspective: The Story of Liquidity and Cryptocurrency
Bitmex co-founder Arthur Hayes argued that the deterioration of public accounts in France could force the ECB to create liquidity on a large scale.
This interpretation, reported by Bitmex’s Arthur Hayes, introduced his swirl fund investor to Degen Crypto at Token2049, reflects the widespread narrative among several macrocrypto investors.
At the same time, many economists are cautioning, emphasizing that the ECB is bound by rules such as the ban on financial funds and the “capital key” principles, in addition to fixed inflation targets.
However, the mitigation potential of that approach is necessarily based on technical standards and economic data, rather than on individual state needs.
Potential impact on Bitcoin and crypto: What History Tells Us
Previous Major Quantitative Limiting Cycles – The Federal Reserve announcement in March 2020 was announced in a Securities Purchase Program of approximately $4 trillion (Fed);
This historically unique episode, albeit in a very different context characterized by a health crisis and specific fiscal policy, helps to reinforce the idea that a large-scale infusion of liquidity could have positive consequences for cryptocurrencies.
It is clear that the correlation between global liquidity and cryptographic performance does not imply a direct and mechanical causality given the complexity of multiple factors during play.
For more insights, it is helpful to consult with the ECB’s guide to quantitative mitigation and an analysis of the half dynamics of Bitcoin.
Foreign flows, inventory and flows, market risks
In an analysis of French debt situations, it is important to distinguish between flows and stocks. While the majority of the debt is held by foreign investors, it is the willingness of these investors to buy or increase based on new price terms that affect the yield.
In other words, if large foreign holders reduce exposure, Paris should either offer higher premiums or rely on strong domestic demand.
In the context of stress, the ECB can adjust for reinvestment to prevent local shocks from turning into a systematic crisis, with some of the speculative capital likely to move to alternative assets, including cryptocurrencies.
Impact on ECB monetary policy
In the short term, this strategy continues to focus on development, with the aim of avoiding fiscal instability. The ECB combines tools such as targeted communication, reinvestment flexibility, and specific financing lines before relying on new QEs.
Only a combination of weak growth, lower inflation to a 2% target, and sustained tensions in the debt market could lead to a revision of the current monetary policy path.
Even in such hypothetical scenarios, each intervention is adjusted based on economic and financial data and best includes the risks associated with excessive liquidity expansion.
Conclusion
The scenario outlined by the large French deficit and the loss of banks in France highlights the market’s sensitivity to ECB decisions in a real context where the risk of financial fragmentation is real.
While some interpret these signals as invitations to speculate about the arrival of further monetary policy interventions that could lead to favorable conditions for Bitcoin and other crypto, caution remains essential and volatility remains a guide risk.
For investors, there are two messages. Without assuming a 2020 script repetition, closely monitor flow and fluidity signals from the ECB and consider the procrypt story as one of many dynamics in the current complex economic landscape.
