-0.40%
“We expect the significant amount of liquidity flowing into the market to be reflected in all risk assets, including cryptocurrencies,” Bitfinex analysts told The Block.
The exact size and scope of China’s stimulus could still surprise markets, analysts said, adding that the expected effects have not yet been fully reflected. “This is especially true if the actions are larger or more aggressive than expected,” the analysts added.
Bitcoin market volatility expected to increase
Bitfinex analysts added that while Bitcoin market volatility has been decreasing recently, the digital asset could react positively to significant macroeconomic developments originating in China. “Even if some stimulus is expected, the actual announcement could lead to a temporary spike in volatility as traders adjust to the details of the stimulus package,” they said.
Digital Asset Group Managing Director Alex Tapscott also highlighted that China’s intervention in financial and real estate markets to support asset prices and stimulate the economy could boost buying demand in the cryptocurrency market.
“Easing monetary and fiscal conditions will drive risk assets to bid, and cryptocurrencies are likely to benefit,” Tapscott said in an email to The Block.
Beijing announced a series of stimulus measures in late September to lower borrowing costs and stimulate economic activity. These measures included cutting existing mortgage rates by half a percentage point and lowering reserve requirements to encourage banks to lend.
Related indices
The combination of increased liquidity from China’s fiscal stimulus measures and the possibility of further interest rate cuts from the Federal Reserve could support growth in global risk asset as well as cryptocurrency markets. This is reflected in the MSCI ACWI, a global equity index representing large and mid-cap stocks from 23 developed and 24 emerging markets. The index recently hit an all-time high following the Federal Reserve’s first interest rate cut on September 18 and China’s recent stimulus efforts. .
The MSCI International ACWI Net Index is currently at an all-time high. Images: Financial Times and LSEG
Increasing global liquidity correlated with Bitcoin bullish trend
In a separate report from ETC Group, analysts noted that global money supply has hit record highs, which has historically been correlated with Bitcoin’s bullish trend. They highlighted three key catalysts that could push Bitcoin higher in the coming months: supply dynamics due to Bitcoin halving, global economic recovery following a monetary policy shift, and the upcoming US presidential election.
M2 money supply hits record high. Image: Micromacro.
The report also covered the US election, with betting markets such as Polymarket showing Donald Trump leading Kamala Harris by odds of 55.5% to 43.7%. “If the US election were held today, a Trump win could mean a rise in the price of Bitcoin by around 10.7%, while a win by Harris could mean a rise in the price of Bitcoin by around 10.5% based on historical sensitivity,” analysts said. “It could go down,” he said.
According to the ETC report, Bitcoin performed relatively well after the last US presidential elections in 2012, 2016, and 2020, regardless of the winning party. Nonetheless, he pointed out that this presidential election could have an even bigger impact on the price of Bitcoin as it is the first presidential election in which the cryptocurrency has actually been part of the discussion.
According to Bitcoin price data from The Block, Bitcoin has traded little changed over the past 24 hours and is currently trading at around $61,277.
Disclaimer: The Block is an independent media outlet delivering news, research and data. As of November 2023, Foresight Ventures is a majority investor in The Block. Foresight Ventures invests in other companies in the cryptocurrency space. Cryptocurrency exchange Bitget is an anchor LP of Foresight Ventures. The Block continues to operate independently to provide objective, impactful and timely information about the cryptocurrency industry. Below are our current financial disclosures.
© 2024 The Block. All rights reserved. This article is provided for informational purposes only. It is not provided or intended to be used as legal, tax, investment, financial or other advice.