People’s Bank of China injects liquidity, will it boost Bitcoin price?
The actions of the People’s Bank of China appear to be aimed at stimulating the national economy. However, they can also have an indirect impact on cryptocurrencies. China’s “quantitative easing” is correlated with the growth of total crypto market capitalization (TOTALCAP). This has been going on since the beginning of 2023.
Furthermore, this is evident in the sharp rise of some “Chinese altcoins”. For example, as BeInCrypto recently reported, Conflux (CFX) has grown by more than 300% in the past week alone.
Another cryptocurrency that originated in China, Filecoin (FIL) is currently up 162% since the beginning of 2023. Neo (NEO) can boast similar performance. At press time, NEO is up around 100% over the same period.
Recent positive reports from Hong Kong, which aspires to be Asia’s crypto hub, are not insignificant. The zone, in the People’s Republic of China, aims to fully legalize the buying, selling and trading of cryptocurrencies by June. Furthermore, it will become a crypto portal for mainland Chinese institutions.
The People’s Bank of China also seems to have a positive impact on the Bitcoin price. Macro crypto market analyst @tedtalksmacro tweeted a chart of BTC and PBoC liquidity injection.
It shows that the previous massive liquidity injection in early 2020 is correlated with the macroeconomic bottom of the Bitcoin price. The next relatively large injection of cheap cash that is currently taking place also seems to come right after the bear market bottom “passes through”.
Additionally, the possibility of a trend change in global economies is confirmed by the chart of assets held by the world’s largest central banks published in the thread below the tweet.
In it, we see that while the US Federal Reserve and the European Central Bank (red and green) are still in a downtrend. While the central banks of China and Japan (yellow and brown) have been bullish since late 2022.
This reinforces the “Chinese crypto bomb” narrative and adds to the argument that Asian markets could catalyze the next crypto bull market. Of course, China’s role in this process should not be absolute. Because the real impact on the economy and financial markets of the ongoing “fiat printing” is unknown.