Bank of China’s (PBOC) massive stimulus package sparks Bitcoin speculation, but impact remains limited

The People’s Bank of China (PBOC) has rolled out its largest stimulus package since the COVID-19 pandemic, drawing attention from global financial markets and crypto enthusiasts alike.

Dubbed a “policy bazooka” by the South China Morning Post, the package includes measures such as reducing the reserve requirement for banks and cutting the mortgage rate by 50 basis points, aimed at boosting the nation’s sluggish economy.

China’s Stimulus and the Crypto Market

Following this announcement, many in the crypto community speculated about the potential impact on Bitcoin and other digital assets. Su Zhu, the founder of the now-defunct crypto hedge fund Three Arrows Capital, tweeted that the “China stimulus cycle begins,” hinting that these liquidity-boosting measures could favor digital asset prices.

This idea stems from a long-held belief that an influx of liquidity—driven by central bank policies—can drive investors towards alternative, higher-risk assets like Bitcoin.

Since Zhu’s comment, Bitcoin’s price has only ticked up slightly, from $63,000 to $63,200, with a brief spike to $64,500. However, the modest increase suggests that the expected Bitcoin rally has yet to materialize in full force.

Liquidity Boost and Bitcoin’s Global Ties

Historically, Bitcoin's price has shown a strong correlation with global liquidity, as noted in a recent research report by crypto analyst Lyn Alden. This correlation is based on the idea that when liquidity flows into global markets, risk assets—such as cryptocurrencies—tend to benefit. Jake Ostrovskis, an over-the-counter (OTC) trader at Wintermute, echoed this sentiment, noting that China’s policy moves could inject "a significant amount of liquidity into global markets" in the coming months, potentially supporting Bitcoin’s price.

But while rising global liquidity often boosts Bitcoin and other risk assets, the effect of China’s policies on the crypto market remains limited due to the country’s ban on cryptocurrency trading since 2021.

Brian Rudick, a senior strategist at GSR, explained that although China’s stimulus measures provide cheaper fiat currency, Chinese citizens still lack access to buy Bitcoin legally.

Challenges in China's Economy

The PBOC’s stimulus package aims to address several pressing economic issues in China, including declining consumer spending and a sluggish housing market.

In addition to the reserve and mortgage rate cuts, the central bank also introduced a stock stabilization fund worth 800 billion yuan ($113 billion) to support Chinese stocks.

Despite these measures, some analysts, including Opening Bell Daily’s Phil Rosen, have voiced skepticism about their overall impact. Rosen noted that the package may not be enough to revive China’s struggling economy, calling it "more of a pellet gun than a bazooka" and doubting its ability to restore consumer confidence.

Related reading：The Industrial and Commercial Bank of China comparing Bitcoin and Ethereum to gold might imply a softened stance towards cryptocurrency transactions in China.

Limited Influence on Bitcoin Trading

While the People’s Bank of China’s actions could lead to increased global liquidity, Bitcoin's muted response can largely be attributed to China’s strict ban on crypto trading.

The ban means that any liquidity generated from the stimulus package is unlikely to flow directly into digital assets, limiting the potential price surge.

Even so, Hong Kong—a special administrative region with its own financial regulations—has seen some inflows into crypto products. Earlier this year, Hong Kong’s securities regulator approved three spot Bitcoin ETFs, offered by China AMC, Harvest, and Bosera HashKey.

While these products are not accessible to mainland Chinese investors, they have seen modest inflows, with China AMC’s spot Bitcoin ETF adding about 16 Bitcoin (worth approximately $1 million) earlier this week.