China’s recent economic stimulus measures have drawn attention across global markets, with some speculating whether these efforts could impact Bitcoin and other cryptocurrencies. The People’s Bank of China (PBOC) announced a suite of actions aimed at boosting liquidity, including reducing bank reserve requirements and cutting mortgage rates, which could inject significant liquidity into the Chinese economy. This move has been compared to a “policy bazooka,” though some are skeptical of its potential impact.
The crypto community has been quick to respond to the stimulus news, with many questioning whether this influx of liquidity could lead to a boost in digital asset prices, including Bitcoin. Su Zhu, the co-founder of now-defunct Three Arrows Capital, hinted that China’s central bank actions might signal the start of a stimulus cycle that could favour digital assets. This sentiment ties into broader research suggesting a correlation between global liquidity and Bitcoin’s price movements. However, while there was a small uptick in Bitcoin’s value following these developments, the price action has been relatively muted, rising just slightly from $63,000 to $63,200, and briefly hitting $64,500 before receding.
The PBOC’s stimulus package is expected to improve liquidity globally, and in the past, increased liquidity has typically been favourable for risk assets like stocks and cryptocurrencies. Research from analyst Lyn Alden supports this view, highlighting that Bitcoin tends to perform well when global liquidity is high. Wintermute OTC trader Jake Ostrovskis also noted that the PBOC’s actions add significant liquidity to global markets, which could provide supportive conditions for risk assets as the year progresses.
Despite the optimism from some corners of the crypto space, others are more cautious about the direct impact this stimulus could have on Bitcoin, especially given China’s ban on cryptocurrency trading. Brian Rudick, a senior strategist at market maker GSR, pointed out that while liquidity injections and lower interest rates generally push investors toward riskier assets, China’s restrictions on crypto may prevent a significant movement into Bitcoin. Though more fiat currency will be available in China, Rudick argues that it is unlikely this will translate into increased Bitcoin demand due to the ongoing ban on crypto trading in the country.
Additionally, while China’s stimulus is sizeable, there are concerns that it may not be enough to reverse the slowing economy or restore consumer confidence. The stock market has seen some positive movement—China’s CSI 300 index has risen 7% over the past five trading days—but many, including Phil Rosen of Opening Bell Daily, question whether this round of stimulus will be sufficient to counteract deeper issues in the housing market and overall demand. Rosen described the stimulus as more of a “pellet gun” than the policy “bazooka” many were expecting, suggesting that the measures may fall short of the aggressive economic revitalisation needed to kickstart the economy fully.
One area where the impact of this stimulus could be felt more directly is in Hong Kong, where three spot Bitcoin ETFs were approved earlier this year. Although crypto trading remains banned in mainland China, Hong Kong operates under its own regulatory framework. The ETFs saw some inflows this week, with China AMC’s spot Bitcoin ETF receiving around 16 Bitcoin (valued at approximately $1 million) on Monday. While these figures are modest, they highlight that there is interest in Bitcoin-related products in the region, even if direct access for mainland Chinese investors remains off-limits.
Ultimately, while the PBOC’s stimulus package has generated a lot of interest and speculation about its potential effects on the crypto market, it remains to be seen whether it will lead to a significant boost in Bitcoin’s price. The broader crypto market is watching closely, but with trading restrictions still firmly in place in China, any immediate surge in demand for Bitcoin from this liquidity increase appears unlikely. Nonetheless, with the global liquidity environment improving, Bitcoin and other cryptocurrencies may still see some benefits over time, especially as more investors look for alternatives to traditional assets in an increasingly volatile economic landscape.
