Will China’s increase in money supply boost Bitcoin’s value?

Following a rate cut by the Federal Reserve that boosted Bitcoin’s price, global markets are now reacting to news of the largest stimulus package from the People’s Bank of China since the COVID-19 pandemic.

China’s central bank implemented significant stimulus measures, including reductions in reserve requirements for banks and mortgage rates, as reported by the South China Morning Post.

China’s stimulus measures led to speculation in the crypto community about potential impacts on Bitcoin and crypto prices, with references to the “money printer go brr” meme.

Su Zhu, founder of Three Arrows Capital, noted on Twitter the beginning of China’s stimulus cycle and its potential positive effects on digital asset prices.

While the price of Bitcoin saw a minor increase following Zhu’s remarks, reaching $64,500 at its peak, it later retraced those gains.

The increased liquidity resulting from the central bank’s actions is expected to positively impact Bitcoin’s price, according to recent research that highlighted a strong correlation between Bitcoin and global liquidity.

Market analyst Jake Ostrovskis also acknowledged the boost in liquidity from the central bank’s actions, indicating support for market conditions heading into the end of the year.

In addition to the stimulus measures, the People’s Bank of China implemented various steps to support the economy, such as aiding consumer spending and housing markets.

Despite a rise in the CSI 300 stock market index, concerns remain about the effectiveness of the stimulus package in addressing consumer confidence and demand issues, as noted by market experts.

The recent stimulus efforts by the Chinese central bank come after the Federal Reserve’s rate cut, which was seen as a positive force for risk assets like stocks and crypto.

While global liquidity usually benefits risk assets, the impact on Bitcoin may be limited due to China’s ban on crypto trading since 2021.

Although mainland Chinese investors are restricted from accessing Hong Kong’s spot Bitcoin ETFs, recent inflows into these products suggest some interest in the region.

Edited by Andrew Hayward