The Chinese economy has been struggling recently, which has led the People’s Bank of China (PBOC) to intervene with some drastic measures. As of now, they’ve already rolled out two support packages, and we’re seeing the effects ripple through the market. Interestingly, Bitcoin seems to be one of the beneficiaries. In just the past 24 hours, Bitcoin’s price has risen by 2%, putting it at $64,400.
Is the Chinese Central Bank Helping Bitcoin?
On September 24, the PBOC made a big announcement: they’re injecting $140 billion into the financial system. Part of this involves lowering the reserve requirements for banks by 0.50%, which means banks can lend more money. The PBOC has also cut interest rates and loosened up rules around buying property in China to help boost the economy and support the struggling real estate market.
According to Jamie Coutts, a lead analyst at Real Vision, these actions could be very positive for Bitcoin. He believes that the Chinese central bank is influencing global monetary policy. Other central banks might feel the pressure to follow suit.
“The bottom is in for global central bank liquidity for this cycle. Sit back and watch the other CBs fall into line. In a credit-based fiat fractional reserve system, debasement is a feature, not a bug,” Coutts said.
So, the Chinese cut the RRR, adding $113 billion of liquidity support to the equity market, potentially setting up a 'stock stabilization fund' and will lower borrowing costs on as much as $5.3 trillion in mortgages and easing rules for second-home purchases.
The bottom is in… pic.twitter.com/auKmc6HCt6
— Jamie Coutts CMT (@Jamie1Coutts) September 24, 2024
The Relationship Between Chinese Stimulus and Bitcoin Price
If we look at past instances, we can see that there’s a history of Bitcoin’s price benefiting from Chinese economic stimulus. Take October 2023, for example, when the PBOC injected $367.7 billion into the market. Then, in January 2024, they lowered the reserve requirements for banks by 0.50% again. Not long after these moves, Bitcoin’s price doubled, going up by 100%.
What we’re seeing now seems to follow the same pattern. With the PBOC taking steps to support its economy, Bitcoin’s price could continue to rise. It’s an interesting time to watch how global monetary policies play into Bitcoin’s movement. Will other central banks react in the same way, and will Bitcoin continue to benefit? We’ll have to wait and see, but the current trends are worth paying attention to.
Keep following us at HowToBuyBitcoin.org for the latest Bitcoin news and insights.