Even though cryptocurrencies are banned in China, it is worth remembering that Hong Kong has Bitcoin and Ethereum ETFs, launched in April this year, which could be a path to this market.
Bitcoin on the Great Wall of China (Midjourney / Livecoins)
China, the world's second-largest economy, announced on Monday (23) that it is taking several measures to stimulate its economy. The highlight is a 0.5% cut in the Reserve Requirement Ratio (RRR) that could introduce 1 trillion yuan into the market, as well as other stimuli to the real estate sector.
In simpler words, this means that there will be more money circulating in the economy, which should flow into investments in stocks, metals and even cryptocurrencies, even though they are banned in the country.
The announcement has already had an impact on the stock market. The CSI 300, an index that brings together the 300 largest companies in China, is up 4.33%.
The CSI 300 index, which includes the 300 largest Chinese companies listed on the stock exchange, is on the rise after government measures to stimulate the economy. Source: TradingView.
Changes in China’s monetary policy are also likely to impact Bitcoin
Bitcoin has seen a significant surge in recent days after the Fed implemented a 0.5% interest rate cut last week. While China’s central bank stimulus has yet to impact Bitcoin, there is good reason to believe it will soon.
This is because China is the second largest economy in the world, just behind the USA.
China's GDP is the 2nd largest in the world. Source: Google.
Pan Gongsheng, governor of China's central bank, said the new stimulus is expected to provide about 1 trillion yuan ($776 billion) through the Reserve Requirement Ratio (RRR).
In addition, there were also cuts in several rates, from the 7-day reverse repurchase rate to the 5-year prime lending rate. The sector that received the most support was real estate, with several benefits.
“China needs a lower rate environment to boost confidence,” Pan said, adding that rates could fall further this year depending on market liquidity.
The stimulus is being seen as the most aggressive since the health crisis in 2020.
Even though cryptocurrencies are banned in China, it is worth remembering that Hong Kong has Bitcoin and Ethereum ETFs, launched in April this year, which could be a path to this market.
Another point is that the world's two largest economies are moving in the same direction. So this means that other countries should cut interest rates.
With more money circulating in the economy, investors are likely to seek variable income options to at least beat inflation. These include stocks, metals and cryptocurrencies.
While gold is trading at $2,644, its highest price in history, Bitcoin remains firm above $63,000 this Tuesday (24), but still far from its peak of $73,800 recorded in March of this year.
