The recent double interest rate cuts by China and the United States have become the focus of global financial markets. This monetary easing policy has not only had an impact on traditional financial markets, but also has potential benefits for the cryptocurrency market. Although stock trading may be a wiser choice than cryptocurrency trading in China, the fourth quarter may be a strong performance globally, especially in the Bitcoin market.
As the global economy faces pressure to slow down, China and the United States have successively adopted interest rate cuts to stimulate the economy. In the United States, the Federal Reserve System (Fed) has recently cut interest rates in response to rising inflationary pressures and economic uncertainty. At the same time, the People's Bank of China has also adopted similar policies, trying to promote domestic economic recovery through monetary easing. The monetary policies of China and the United States are relatively synchronized, injecting more liquidity into the global market and promoting investment growth in multiple fields.
The double interest rate cut policy is intended to boost market confidence, increase liquidity, and provide more incentives for businesses and consumers to borrow. For traditional markets, interest rate cuts usually lead to a rise in the stock and bond markets, because low interest rates mean lower financing costs for businesses and increased consumer willingness to spend. However, the impact on the cryptocurrency market may be more far-reaching. Especially in the context of large-scale monetary easing by central banks around the world, cryptocurrencies such as Bitcoin are seen as a tool to fight inflation and have therefore attracted more attention from investors.
Interest rate cuts are usually accompanied by a depreciation of fiat currencies and an increase in market liquidity. This is often good news for Bitcoin, which is regarded as "digital gold". Since its birth, Bitcoin has been regarded by many as a tool to hedge against inflation, especially when central banks around the world continue to implement monetary easing policies. When the purchasing power of fiat currencies gradually declines, investors will naturally look for new value storage tools, and Bitcoin has gradually become one of the safe-haven assets due to its decentralized and limited supply characteristics.
Although the double interest rate cut policy is good for the cryptocurrency market, investors in China may not be so enthusiastic about cryptocurrency trading at this stage. The reasons are mainly as follows:
First, China has strict regulation on cryptocurrencies. Since China banned ICOs (initial coin offerings) and cryptocurrency trading platforms in 2017, investors in the country have not been able to easily participate in cryptocurrency trading. Although blockchain technology itself has government support, cryptocurrencies such as Bitcoin face relatively strict restrictions. Therefore, for Chinese investors, there are not many channels to invest in cryptocurrencies directly.
Secondly, the recent strong performance of the Chinese stock market has attracted a lot of investors' attention. The domestic stock market has risen sharply due to the unexpected rebound of China's manufacturing purchasing managers' index (PMI). PMI is an important indicator of economic health, which usually reflects the trend of expansion or contraction of the manufacturing industry. When the PMI exceeds 50, it means that the manufacturing industry is in an expansionary state, which often drives the stock market up. The recent PMI data shows that the improvement in China's economic activities has directly driven the rise of the A-share market, especially with the support of the interest rate cut policy, the stock market has become the first choice for a large amount of funds.
Finally, China's monetary policy has undergone major changes this month, injecting a large amount of liquidity into the market, reducing the reserve requirement ratio by 2 points in one go, injecting about 1 trillion yuan into the financial market, and lowering the 7-day reverse repurchase operation rate, which bears the main policy interest rate, by 0.2%, while lowering the interest rate of existing mortgage loans. With both policies and funds in place, it is hard not to make money. When the Chinese stock market soared, many cryptocurrency players who invested in cryptocurrencies and hyped meme coins were shaken about their cryptocurrency investments and returned to the familiar stock market. They believed that cryptocurrencies were not competitive enough and that cryptocurrencies were like a dream. In response, brokerage employees revealed that more than 1.3 million people were waiting in line for account opening!
In contrast, the cryptocurrency market is more volatile and is greatly affected by global policies and market sentiment. In China's investment environment, many investors prefer to choose the stock market with relatively stable policies to invest, rather than taking the high risk of cryptocurrency. Therefore, although Bitcoin has received widespread attention worldwide, stock trading is still a more mainstream investment option in China at this stage.
Although the enthusiasm for cryptocurrency trading in China may not be as high as the stock market, from a global perspective, Bitcoin is still expected to have a strong performance in the fourth quarter of 2024. Coinbase's report pointed out that the demand for Bitcoin from institutional investors is rising globally, especially in the current uncertain global economic environment. As a safe-haven asset, Bitcoin is gradually gaining more favor.
Additionally, the U.S. dollar’s depreciation trend may also drive Bitcoin’s gains. As the Federal Reserve continues to cut interest rates and the real purchasing power of the U.S. dollar weakens, investors may turn to cryptocurrencies such as Bitcoin as a hedge against inflation and the devaluation of fiat currencies. At the same time, according to historical experience, every time Bitcoin is halved, its price will rise significantly in the following months. Therefore, Q4 may become one of the strongest quarters for Bitcoin in 2024.
In summary, no matter how the interest rate cuts in China and the United States affect their respective financial markets, Bitcoin, as a global cryptocurrency asset, still shows its strong growth potential. In the future, global economic uncertainty and inflationary pressure will drive more investors to seek safe-haven assets, and Bitcoin may become the first choice with its unique value storage function.
