Bitcoin’s Trajectory: More Influenced by U.S. Policies as China Implements Stimulus Measures

Cryptonews Economy Politics John Brightwater September 24, 2024

Bitcoin’s Trajectory: More Influenced by U.S. Policies as China Implements Stimulus Measures

Bitcoin and ether declined marginally following stimulus measures from the People’s Bank of China. The measures, intended to revive China’s economy, resulted in significant gains for regional stock indices. Analysts indicate that Bitcoin’s price fluctuations are more influenced by U.S. monetary policies than by Chinese economic stimuli.

Recent developments indicate that Bitcoin and ether have seen slight declines after the People’s Bank of China (PBOC) announced significant economic stimulus measures. Following this announcement, local stock indices witnessed gains as investors shifted their focus towards equities. Despite Bitcoin reaching a one-month high of $64,500 on the Monday prior, it fell to $62,700 early Tuesday as market reactions to China’s stimulus unfolded. The PBOC implemented a 50 basis point cut to the reserve requirement ratio for banks, reduced the seven-day reverse repo rate to 1.5%, and decreased the minimum down payment requirement for mortgages to 15%. Rick Maeda, a research analyst at Presto Research, noted that Bitcoin’s muted response to the PBOC’s announcement underscores a stronger correlation with U.S. Federal Reserve policies than with Chinese financial measures. He referred to this correlation as nearly at a two-year high with U.S. stock markets, particularly evident after last week’s Federal Open Market Committee meeting. The CoinDesk 20 Index, tracking major cryptocurrencies, declined by 1.8% amidst these developments, although Celestia’s TIA tokens saw a 17% increase following a significant fundraising announcement. Despite the Chinese central bank’s rate cuts and stimulus efforts, stock indices across the region rose sharply, signaling that local traders were more engaged in equity investments than in cryptocurrencies. The Hang Seng index in Hong Kong climbed 3.2%, while the Shanghai Composite index increased by 2.3%. ING’s chief economist for Greater China, Lynn Song, indicated that such easing measures might lead to a slight depreciation of the yuan, with the USD-CNY exchange rate expected to rise in response. However, predictions point towards a gradual appreciation of the yuan in the medium term, influenced by interest rate differentials. In a broader context regarding U.S. elections, traders from QCP Capital expressed that a potential victory by Democratic candidate Kamala Harris may not be as negatively perceived as previously thought. Notably, Harris has indicated intentions to support the growth of the crypto sector while ensuring consumer and investor protection. This aligns with efforts by crypto advocates, including Anthony Scaramucci, to engage with her campaign’s policy directions.

The relationship between Bitcoin and global economic policies has intensified, marked by the recent economic stimulus initiatives undertaken by the People’s Bank of China. These measures, aimed at invigorating a slowing economy, are juxtaposed against the backdrop of macroeconomic factors driven by U.S. Federal Reserve policies. Understanding these dynamics is essential for analyzing Bitcoin’s market behavior and its correlation with traditional finance, particularly in light of shifting investor sentiments and policy responses from major economic players.

In summary, Bitcoin and ether faced slight declines following China’s aggressive stimulus measures, revealing their increasing linkage to U.S. Federal Reserve policies rather than Chinese economic actions. With significant rate cuts by the PBOC, local equities surged, whereas cryptocurrencies did not respond similarly. Additionally, the potential implications of U.S. electoral outcomes on cryptocurrency policies suggest a complex and evolving relationship between digital assets and traditional financial regulations, warranting close observation in ongoing market analyses.

Original Source: www.coindesk.com