China's central bank starts printing money! Will a large amount of RMB flow into Bitcoin transactions?

FX168 Financial News Agency (Asia Pacific) reported that after the Federal Reserve cut interest rates by 50 basis points in September to stimulate the rise of Bitcoin, the People's Bank of China (PBOC) has launched the largest stimulus policy since the outbreak of the COVID-19 pandemic to create liquidity conditions for the cryptocurrency market. Analysts believe that this move is conducive to boosting Bitcoin prices, which means that RMB funds have the potential to flow into Bitcoin.

Decrypt reported that the People's Bank of China launched a series of stimulus measures on Tuesday (September 24), which the Hong Kong South China Morning Post (SCMP) described as a "policy bazooka". These measures include a 50 basis point cut in the bank's reserve requirement ratio and a 50 basis point cut in the interest rate on existing residential mortgage loans.

Source: Decrypt

China’s massive stimulus measures have led many crypto enthusiasts to speculate whether the country’s move to “print money” will ultimately benefit Bitcoin and cryptocurrency prices.

Zhu Su, founder of defunct crypto hedge fund Three Arrows Capital, tweeted Monday evening that “China stimulus cycle begins,” suggesting that measures taken by the Chinese central bank will support digital asset prices.

Since Zhu’s post, the price of bitcoin has risen only slightly, from $63,000 to about $63,200. On Tuesday, the asset’s price rose as high as $64,500 before giving up gains.

The sudden easing by the People’s Bank of China is expected to increase global liquidity, which is generally good for the price of bitcoin, according to research commissioned by cryptocurrency analyst Lyn Alden. The research report released earlier in September found that the price of bitcoin “has shown a strong correlation with global liquidity” over the past few years.

Jake Ostrovskis, an over-the-counter trader at market maker Wintermute, echoed the sentiment, writing in a market update that the central bank’s move “injected a lot of liquidity into global markets, providing support for the market at the end of the year.”

Meanwhile, the People’s Bank of China has taken a number of other measures to boost the economy, which has seen a marked slowdown in areas such as consumer spending and housing. Those measures include injecting 800 billion yuan, or about $113 billion, into China’s stock market and launching a so-called stock stabilization fund program.

Phil Rosen of Opening Bell Daily said that while China's stock index CSI300 has risen 7% in the past five trading days, the stimulus package may not be enough to help China reverse the trend of falling consumer confidence and demand.

"The stimulus package (China) announced on Tuesday was more like a shotgun than a bazooka. It's big news - but unfortunately for Chinese consumers and the local real estate market, it's not enough."

The Chinese central bank's stimulus measures follow the Federal Reserve's first interest rate cut in four years, which analysts believe will be a catalyst for so-called risk assets such as stocks and cryptocurrencies.

Brian Rudick, senior strategist at market maker GSR, said that while an increase in global liquidity generally benefits risky assets, the reaction of Bitcoin is likely to be muted. This is because China has banned cryptocurrency trading since 2021.

"When liquidity increases and interest rates fall, people stay away from risky assets," he said. "People can get cheaper fiat currency in China, but they won't go out and buy Bitcoin because of it."

Earlier this year, the Hong Kong Securities and Futures Commission approved three Bitcoin spot ETFs, including China Asset Management, Harvest Fund Management and Bosera HashKey.