Bitcoin jumps 4% as positive Chinese manufacturing data improves risk appetite
Bitcoin (BTC) traded higher on Wednesday as positive Chinese manufacturing data eased concerns about global growth and improved risk appetite in global financial markets.
China’s official manufacturing purchasing managers’ index rose to 52.6 in February, the fastest in over a decade, after January’s 50.1, according to data released on Wednesday. A reading above 50 indicates an expansion of activity. The non-manufacturing PMI rose to 56.3 from January’s reading of 54.4.
The positive news from China, the world’s factory and biggest trading partner for the US and Germany, pushed the US dollar lower against major currencies, lifting risk assets such as bitcoin and stocks higher.
The leading cryptocurrency by market capitalization jumped 4% from $23,000 to nearly $24,000 before retreating slightly to $23,700, according to coinDesk data. The dollar index, which tracks the dollar’s value against the majors, fell 0.5% to 104.36.
Hong Kong’s Hang Seng index rose 4.15%, adding to the risk of upside in Asian stock indices. Major European indices and futures linked to Wall Street’s technology-heavy index Nasdaq also showed modest gains. Bitcoin is positively correlated to the Nasdaq and the stock markets in general.
The cryptocurrency’s early Wednesday bounce is consistent with the recent trend of Asian flows leading market strength.
“We note that ever since the BTC bottom in November, BTC has seen a healthy and steady uptrend in Asian hours, with no significant downside days. The returns during the US session have been more erratic, with the big rallies in January occurring during US trade. session, while last week’s rally took place in European hours,” said Vetle Lunde, analyst at K33 Research in a note published on February 21.
The narrative in the market is that recent liquidity injections from the People’s Bank of China are offsetting the ongoing Federal Reserve tightening and keeping bids on risk assets, and the future of the crypto market now hinges on developments in the East.
“Liquidity continues to be a major offset to the tightening of interest rates, mainly from the East. China continues to pump cash to maintain sufficient liquidity in the banking system and to trigger post-covid zero economic growth,” David Brickell, director of institutional sales at crypto-liquidity network Paradigm , said in Fed. 28 issue of the Macro Pulse newsletter.
Hong Kong has recently warmed to crypto, giving rise to speculation that China will eventually ease restrictions. The island nation’s Securities and Futures Commission (SFC) issued a statement last month announcing a consultation on the proposed requirements for operators of virtual asset trading platforms.
“With Hong Kong seen as a proving ground for the mainland, the opportunity for the vast sums of retail wealth to flow into crypto will maintain a positive sentiment towards US-driven R&D,” Brickell noted.
From a technical analysis standpoint, a convincing move above the February highs around $25,000 is needed to strengthen the immediate bullish bias. The area around the aforementioned level limited the August bounce.
“The technical picture on the weekly time frame suggests that only a consolidation above $25,000 will strengthen the bullish view of the market,” said Alex Kuptsikevich, senior market analyst at FxPro.
