 announced significant steps to stabilize the economy, including rate cuts. Rate cuts have triggered upward momentum in crypto markets, a pattern that may repeat following China’s latest actions.){kind=link}
China has unveiled a series of measures to counter its prolonged economic downturn, driven by a stagnant property market and broader economic struggles.
On Tuesday, the People’s Bank of China (PBoC) announced significant steps to stabilize the economy, including reducing the amount of reserves banks are required to hold and slashing interest rates on loans to commercial banks.
These moves are designed to stimulate property purchases, reduce borrowing costs, and breathe life into the world’s second-largest economy.
China Announces Fresh Rate Cuts
This comes as the U.S. Federal Reserve recently cut interest rates, leading to a surge in financial markets, particularly in the cryptocurrency sector. Historically, rate cuts have triggered upward momentum in crypto markets, a pattern that may repeat following China’s latest actions.
Once a major engine of China’s economic expansion, the country’s real estate market has been severely damaged by the country’s debt problems, which have led to deflationary pressures and increased unemployment. Notwithstanding optimistic forecasts for a post-pandemic economic rebound, the country’s growth has been slow.
The Chinese central bank has also decreased the necessary down payment for real estate acquisitions to counteract this. The government intends to boost demand in the real estate sector, which will subsequently boost the whole economy, by lowering borrowing costs and increasing accessibility to home ownership.
Crypto Markets Surge Following Fed Rate Cut
Parallel to China’s economic initiatives, there has been a significant upsurge in the global cryptocurrency market, partly as a result of the recent interest rate decrease by the U.S. Federal Reserve.
In response to the Federal Open Market Committee’s (FOMC) move to drop rates, the cryptocurrency market saw inflows of $321 million for two weeks running, according to a CoinShares study released on September 23. The demand for financial solutions based on cryptocurrencies increased significantly as a result.
With $284 million in inflows, Bitcoin led the way and accounted for the majority of market activity. $5.1 million in inflows were also seen in short-Bitcoin instruments, which let investors profit from drops in Bitcoin prices. This suggests that some traders are hedging against future volatility.
Bitcoin’s Price Surge, Is $70,000 Coming?
After the U.S. rate cut, Bitcoin saw an almost 7% increase, breaking through $64,000 and now trading at $63,555.01. Analysts forecast that if the current optimistic mood persists, driven by positive macroeconomic factors like the rate cuts that are still in place, Bitcoin may soon hit $70,000.
Since the demand for high-risk assets like cryptocurrencies usually increases when interest rates are lower, China’s recent policy actions may give this surge even more impetus.
Lower interest rates have historically promoted more investment in alternative assets, such as cryptocurrencies. If China’s actions are effective in reviving investor confidence in its economy, this might stimulate worldwide markets, including the cryptocurrency industry.