There has been much speculation about the price of Bitcoin. One factor that could make it rocket is Chinese interest rates. Read on as we discuss how they could send the price of Bitcoin soaring.
When the Bitcoin price is discussed, many automatically peg it to the US Dollar. Yet there are many other economies in the world, each of which can impact on its price. China is one such country, and changes to its interest rate could send Bitcoin skyward. Read on as we discuss how this could herald the start of a bull run.
Interest Rate Cuts
The United States Federal Reserve last month declared the much pined for cuts to interest rates. This was followed by a similar statement from the Chinese Central Bank. Many speculators agree that this could signal a bull stagnant years.
Interest rate cuts generally mean people have a tendency to increase their risk levels when investing. When they are high, they go to more tried and tested means. If cuts are announced in the US and China, two of the world’s major economies, then investors are likely to head for riskier asset classes. This includes cryptocurrency, of which Bitcoin is the head of the pack.
Pan Gongsheng, head of the Bank of China, stated that the seven-day repo rate will be cut by 0.2 points. A reserve requirement ratio for local banks will also be slashed to 50 basis points. He also said that depending on circumstances throughout the rest of the year, further cuts between 0.25 and 0.5 may be seen. This is a stronger reduction than that which many expected.
Cryptocurrency in China
China has a topsy-turvy relationship with cryptocurrencies. It has some of the strictest rules in the world on their usage. In 2021 it banned cryptocurrency mining. Previously, it had closed all domestic exchanges and forbade initial coin offerings. However, many people found ways around this due to cryptocurrency’s decentralized nature and China is now one of the world’s crypto hubs. It is estimated that there are around USD$86 billion dollars of transactions there each year.
In other ways, the country has been extremely progressive with its use of digital currency. The People’s Bank of China has a cryptocurrency of its own. By introducing this, the country has aimed to limit the influence of decentralized platforms and use its own tokens. Hong Kong is also positioning itself as a major crypto hub and this is known to be under the influence of Beijing, who may be testing various cryptocurrency-related initiatives there in the near future.
Bitcoin on the World Markets
Over the last week, since rate cuts in the US were announced, Bitcoin has risen by 7.51%. At the time of writing, it followed this with a marginal drop. This has meant that even despite the announcements, it has remained at the key levels of between $62,000 and $65,000.
August 25th saw Bitcoin hit a high of $65,200. It is now back within touching distance of this, despite occasional falls. It has also been noticed that the volatility of Bitcoin is slowly decreasing, after the all-time high of $73,666 in March this year.
After outflows in August Bitcoin ETFs have held their head up high once more. Inflows of $4.5million started on Monday 25th September. Top asset management companies like Fidelity and Blackrock are continuing to invest in them, although big outflows like the $40.3 million one this week continue to come from Greyscale. However, the case was not the same for Ethereum ETFs which continued their outflows.
Bitcoin started the year expectantly with many major events on the horizon. First, the introduction of these ETFs came in January. This was followed by a halving event. Typically, a halving even means that the price of Bitcoin rises around three and six months after the event. This year it has not materialized and the price of the coin has remained static.
Elsewhere, others are predicting a huge inflow of money into Bitcoin and crypto due to the aforementioned interest rate cuts. This could come from family offices to sovereign wealth funds. It is believed this will begin in the next month or two, according to David Gokhshtein. He has stated that the delays to the price have been happening due to financial institutions waiting for favourable conditions.
Major financial institutions, particularly BlackRock, are heavily rumoured to be planning an investment of up to $9 trillion in Bitcoin and Ethereum. The world’s largest asset manager, any move by them has strong implications. Another key factor is the looming US election, which could also impact the price.
Bitcoin will always be liquid, but seems to be getting less so. More impacted by current events and with ETFs available, it is becoming a more stable mainstream asset. How it will fare between now and the end of the year is yet to be seen, but with prices remaining constant now could be the time to buy.