China Introduces Largest Stimulus Package

Shortly after Federal Reserve officials boosted Bitcoin's price with a rate cut in the US, global markets are now absorbing what is said to be the largest stimulus package from the People's Bank of China since the onset of the COVID-19 pandemic.

On Tuesday, China's central bank unveiled a comprehensive set of stimulus measures, referred to as a "policy bazooka".

These measures included a significant reduction in reserve requirements for banks and a 50 basis point cut in mortgage rates for existing homes.

This large-scale stimulus initiative has sparked speculation among crypto enthusiasts about whether China's decision to "print money"—echoing the popular "money printer go brr" meme—will ultimately support Bitcoin and cryptocurrency prices.

Crypto Prices Like Bitcoin Sees Minor Boost

Su Zhu, the founder of the now-defunct crypto hedge fund Three Arrows Capital, took to X (formerly Twitter) late Monday to declare that the "China stimulus cycle begins," implying that the recent measures from China's central bank could positively influence digital asset prices.

Following Zhu's comments, Bitcoin's price saw a modest increase, rising from $63,000 to approximately $63,200.

On Tuesday, Bitcoin peaked at $64,500 before retracting, currently sitting at $63,822.80—a 0.05% decrease over the last 24 hours but reflecting a 2.79% increase over the past week, according to CoinMarketCap. https://coinmarketcap.com/currencies/bitcoin/

The central bank's unexpected easing is anticipated to enhance global liquidity, a factor that traditionally supports Bitcoin's price.

Research commissioned by crypto analyst Lyn Alden, released this month, highlighted a strong correlation between Bitcoin's price and global liquidity over recent years.

This sentiment was reinforced by Jake Ostrovskis, an OTC trader at Wintermute, who noted in a market update that the central bank's actions inject "a significant amount of liquidity into global markets, supporting conditions into year-end.”

Stimulus Package Might Not Be Effective Enough

Simultaneously, the People's Bank of China implemented a series of measures aimed at revitalising the economy, which has been experiencing significant slowdowns in consumer spending and housing.

Among these initiatives is a substantial injection of 800 billion yuan (approximately $113 billion) to support Chinese stocks, along with the introduction of a stock stabilisation fund.

Despite a 7% rise in the CSI 300, a prominent Chinese stock market index, Phil Rosen from Opening Bell Daily cautions that the stimulus package may fall short of reversing declining consumer confidence and demand.

He noted:

“The stimulus package unveiled Tuesday resembles more of a pellet gun than a bazooka. It is big news—but unfortunately for Chinese consumers and their local property markets, not big enough.”

This stimulus surge follows the Federal Reserve's first rate cut in four years, which analysts believe could act as a catalyst for risk assets like stocks and cryptocurrencies.

While increased global liquidity typically favors risk assets, Brian Rudick, a senior strategist at the market maker GSR, warns that Bitcoin's response may be muted due to China's ongoing ban on crypto trading since 2021.

He expressed:

“When liquidity rises and interest rates fall, people move out on the risk spectrum. People have access to cheaper fiat currency in China, but they don't go out and buy Bitcoin because of it.”