How is the recent Bitcoin dip related to Stocks falling in China?

Well performing crypto market has seen a dip again recently and, as it turns out, seems to be correlated with Shanghai Stocks fall

Recently inflation indices in China, including the producer inflation index and consumer price index, have seen comparatively higher growth than was expected earlier by analysts and experts. The Chinese stock market during trading hours in Shanghai has seen a red day, full of fallen prices that affected the trading price of the flagship cryptocurrency. Bitcoin has seen a price drop and went down upto below $42,000. 

In detail, the Shanghai Composite Index has seen a fall of more than 2%, while there was more than a 3% fall in Shenzhen Component Index and the ChiNext Index also fell by almost 4%. All of this happened due to an unexpected factor: inflation rise in March and potentially one of the major reasons for the recent fall. The producer price inflation (PPI) was expected to be around 7.9% which went beyond it and went upto 8.3% over the year. 

On the other hand, Consumer Price Inflation (CPI) remains somewhat lower than that of PCI at 1.5%, which was also above the expectations of 1.2%. 

The two major differences that have been observed between producer and consumer inflation could either be because consumer inflation is coming to the country or that Producers are sucking the cost up in China, which could lower the margins. 

On Monday, the portfolio Manager at Vontobel Assets Management, Ramiz Chelat, said that the most notable fact is the huge gap between PPI and CPI, which indicates the pricing power amongst almost all the companies in China is weak. On the margins front, they are taking on huge hits. 

The lockdown situations returning in China also somewhat discouraged the economic growth even while the country boasted its heavily criticized ‘zero covid policy’ that turned out to be ineffective. Another critical factor could be the continuously unwinding of the real estate property market, where stocks have seen the biggest falls recently. 

Several other reasons could also include the treasury yields hiking in the US. As a result, a significant amount of foreign investors have been fleeing from China since 2015 to withdraw from the bond market. 

However, bitcoin had seen rising in America during the afternoon of Sunday when it reached approx $43,400. The biggest drop in bitcoin price coincided with the opening of its futures at European time at 10 pm, where it fell by about $42,000 and just below this mark during Shanghai trading. 

Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.

Latest posts by Steve Anderrson (see all)