Chinese Economic Boost and Bitcoin

China’s latest economic stimulus is set to deliver a significant boost to Bitcoin, the world’s largest cryptocurrency. On Tuesday, September 24, the People’s Bank of China (PBoC) unveiled its largest stimulus package since the pandemic, aiming to revive the country’s economy from deflation and stimulate growth.

PBoC governor Pan Gongsheng introduced several bold measures, including a 50-basis-point reduction in bank reserve requirements and cuts to mortgage rates to accelerate economic recovery.

The central bank announced a liquidity injection of $140 billion, coupled with the reserve requirement ratio (RRR) cut of 50 basis points. Additionally, the PBoC eased property purchasing restrictions and lowered borrowing costs to stabilize the economy. China’s real estate sector has been grappling with weak demand, and businesses and consumers have shown low credit demand, prompting the PBoC’s urgent response.

This marks the largest economic stimulus from the PBoC since the pandemic began.

How can China affect Bitcoin Price?

China’s recent stimulus package could have a positive impact on Bitcoin. While China banned Bitcoin in 2021, making the correlation between Bitcoin and Chinese liquidity less direct, global liquidity still influences Bitcoin's performance. China’s easing measures could potentially shift the broader market’s risk appetite.

After the Federal Reserve’s rate cut in September, Bitcoin quickly surged to $64,000. Technically, BTC continues to show strength, with the potential to reach a new all-time high soon. Historically, the Fed's 0.5% interest rate cut triggered a sharp rise in Bitcoin’s price as traders anticipated a new liquidity cycle, and Bitcoin now seems to be following a similar pattern seen in previous years.

Summary

China’s recent stimulus package could positively impact Bitcoin by influencing global liquidity and risk appetite, even though the direct correlation with Chinese liquidity has weakened since the 2021 Bitcoin ban.

Following the Federal Reserve’s rate cut in September, Bitcoin surged to $64,000 and is showing signs of continued strength on the technical charts, with potential for a new all-time high. Historically, Fed rate cuts have sparked Bitcoin rallies, and the current market is reflecting similar patterns seen in previous years.