Bitcoin surged to a seven-day high late Sunday, climbing 2.5% to reach $64,300, buoyed by China’s recent announcement of economic stimulus measures aimed at supporting its struggling economy. This marks Bitcoin’s highest trading level since October 7.
China has pledged to “significantly increase” its debt to bolster its weakening economy, although details regarding the size of the stimulus package remain unclear. This ambiguity has left investors questioning the long-term effects of the measures on the recent recovery in Chinese stock markets.
Asian equities exhibited mixed results following the stimulus news. The Shanghai Composite index rose by 1.6%, reflecting optimism from investors, while the Hang Seng Index in Hong Kong dipped by 0.4%. Japan’s Nikkei 225 gained 0.57%, driven by strong performances in the tech sector. South Korean and Australian markets experienced minor fluctuations.
Last month, Bitcoin had surpassed $65,000 after China announced plans to inject $113 billion in liquidity to support its stock market, alongside cuts to reserve requirements for banks and relaxed regulations for second-home purchases.
In the past month, the Shanghai Composite has seen a remarkable increase of over 20%. However, Chinese stocks have only recently begun to close the gap with their U.S. counterparts, registering a 6.7% rise over the past year compared to a 34.3% increase in the S&P 500.
Market experts believe that China’s stimulus efforts from its central bank could positively influence cryptocurrency markets for the remainder of the year, especially in light of anticipated interest rate reductions in the U.S. and other countries.
Several factors are converging to favor Bitcoin, including China’s stimulus, shifting U.S. macroeconomic data, the upcoming presidential election, and recent payouts following the bankruptcy of FTX.
The latest U.S. payroll figures for September exceeded expectations, with nonfarm payrolls increasing by 254,000, significantly above the forecast of around 170,000. This robust labor market performance has raised concerns that the Federal Reserve may delay or scale back its planned interest rate cuts, as strong employment data could intensify inflationary pressures.
In the same week, the Consumer Price Index (CPI) rose by 2.4% year-on-year, slightly surpassing expectations. The core CPI, which excludes food and energy prices, increased by 3.3%. Despite these modest rises, inflation appears to be on a cooling trend. Nevertheless, the higher-than-expected CPI has led some analysts to suggest that the Fed may adopt a more cautious approach to further easing.
We expected the market to pull back in early October due to portfolio rebalancing by investors at the start of the quarter,” stated Pav Hundal, lead market analyst at crypto exchange Swyftx, in an interview with Decrypt. “We’re now over that hump, and the macro environment looks pretty good despite weak domestic demand in China.”
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