Bitcoin Set for a Rally as China’s Central Bank Unleashes Stimulus

• The Chinese Central Bank just boosted the macroeconomic outlook around Bitcoin.
• With several interest rate cuts, BTC price might break out from its extended sideways movement.

Bitcoin (BTC) is poised to record a new All-Time High (ATH) as the People’s Bank of China (PBoC) announced new policy measures on Tuesday. Concerns have been raised about China potentially missing this year’s 5% growth target, and these actions reflect the Chinese government’s commitment to stabilizing economic conditions.

Impact of China’s $140B Stimulus on BTC

On Tuesday, one of the policy measures announced by Pan Gongsheng, the Chinese central bank governor, was the injection of  $140 billion of liquidity into the financial system. By relieving tight liquidity, monetary authorities created conditions for a steady recovery this year.

China’s central bank announces its most aggressive stimulus since the pandemic.

People’s Bank of China will inject around $140 billion of liquidity into the financial system.

Previously this has sparked a massive bitcoin rally 📈

— Layah Heilpern (@LayahHeilpern) September 24, 2024

Additionally, banks, now loaded with liquidity, can support productive investments and households, stimulating spending. This is the most aggressive stimulus the nation has implemented since the COVID-19 pandemic. 

However, crypto analysts and participants see this measure as a catalyst for the crypto market, specifically Bitcoin. The idea is that excess capital due to fiat devaluation will flow from the Chinese yuan to Bitcoin as a hedge against potential inflation. The injection of liquidity has previously ignited a massive Bitcoin rally. As a result, many believe it’s about time for Bitcoin to repeat history.

Other proposed policy measures include a 50-basis-point (bps) cut in the reserve requirement ratio and a 20-bps cut in key short-term interest rates. As CNF mentioned earlier, PBoC plans to lower interest rates on existing mortgage loans and relax rules for second-home purchases.

Market participants claim the US Federal Reserve’s 50 bps rate cut gave the Chinese government the necessary green light. The Fed’s decision is a potential catalyst for improving market liquidity, encouraging investors to inject more money into riskier assets like Bitcoin. 

Following this decision, Bitcoin has been on an upward movement, creating 20,000 new millionaires, as reported by CNF. The surge also brought the total number of Bitcoin wallets holding at least $1 million to about 110,388. This represents a huge increase from the 89,322 recorded at the beginning of the year.

Rising Institutional Interest in Bitcoin

Moreover, institutional interest in Bitcoin is increasing despite market volatility. As CNF discussed, net positions in CME Bitcoin futures plunged 75%, indicating a decline in shorting activity among huge institutional investors. These institutions are shifting attention to long-term investments rather than betting against Bitcoin. 

This is evident in the rising interest in spot Bitcoin Exchange-Traded Funds (ETFs). Popular asset managers BlackRock and Fidelity Investments are the leading players in Bitcoin-related asset holdings.

Intriguingly, BlackRock recently proposed adopting spot Bitcoin ETFs as a potential hedge against the rising US debt. The asset manager noted that Bitcoin’s limited correlation to traditional financial assets makes it attractive during market uncertainty.

The impact of the positive sentiment shift around BTC remains uncertain. As of writing, BTC’s price has been trading at $63,837, down by 0.15% in the last 24 hours. The trading volume, however, surged 8.3%, indicating investors’ willingness to accumulate the coin, a trend that might further change the price outlook.

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