Can Bitcoin Benefit From PBoC’s Liquidity Injection?
There are new indications in favor of the thesis that the upcoming cryptocurrency bull market may be stimulated by Asian markets, especially China.
The very large amount of cash recently injected into the banking system by the People’s Bank of China (PBoC) correlates with the rapid growth of cryptocurrency market caps and the price of Bitcoin.
The People’s Bank of China is pumping cheap cash
The People’s Bank of China has recently injected a huge amount of cash into the banking system. The aim is to support the country’s recovery from the economic crisis. At the same time, it has stated that it will keep the interest rate unchanged.
China’s central bank has injected 499 billion yuan ($73 billion) into a one-year medium-term loan facility (MLF) at an interest rate of 2.75%. Thus, not only the banking system gets a lot of money. But the cost of getting it is still relatively small.
This is a repeat of a similar operation in mid-January. The People’s Bank of China said in a statement that the cash injection is aimed at keeping the banking system’s liquidity at a “reasonable level.”
In addition, the PBoC also injected 203 billion yuan ($30 billion) into the banking system. It did this through seven-day reverse repos. At the same time, it kept the borrowing cost unchanged at 2.00%.
On a long-term chart of these types of actions over the past five years, we see that 2023 marks the largest series of liquidity injections into the banking system since early 2020. The Chinese central bank’s rapid response at the time was triggered by COVID-19. -19 pandemic economic crisis.
Chinese cryptocurrencies on the rise
The People’s Bank of China’s actions are aimed at stimulating the domestic economy it seems. However, they can also have an indirect impact on cryptocurrencies. China’s “quantitative easing” has been consistent with the growth of the total cryptocurrency market capitalization (TOTALCAP). This has been going on since the beginning of 2023.
Moreover, this is evident in the massive increase in some “Chinese altcoins.” For example, as BeInCrypto recently reported, Conflux (CFX) surged more than 300% in the past week alone. Another cryptocurrency of Chinese origin, Filecoin (FIL), is currently up 162% since the beginning of 2023. Neo (NEO) boasts a similar performance. At press time, NEO had increased by approximately 100% over the same period.
Recent positive reports from Hong Kong, which aims to become Asia’s cryptocurrency hub, are not insignificant. This region, which belongs to the People’s Republic of China, intends to fully legalize the buying, selling and trading of cryptocurrencies in June. In addition, it is set to become a cryptocurrency gateway for mainland Chinese institutions.
A boost for Bitcoin
The People’s Bank of China also appears to have a positive impact on the price of Bitcoin. Macro cryptocurrency market analyst @tedtalksmacro tweeted a chart of BTC and liquidity injections from the PBoC.
It shows that the previous huge liquidity injection in early 2020 was correlated with the macro bottom of the Bitcoin price. The next relatively large injection of cheap cash, which is taking place now, also appears to follow shortly after the bottom of the passing bear market.
In addition, the possibility of a change in the trend of global economies is confirmed by the overview of assets held by the world’s largest central banks published in the thread below the tweet. On it we see that while the US central bank and the European central bank (red and green) are still in a downward trend. While the central banks of China and Japan (yellow and brown) have been on the rise since late 2022.
This reinforces the “Chinese crypto pump” narrative and adds to the argument that the Asian market could catalyze the upcoming cryptocurrency 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 still unknown.
For BeInCrypto’s latest crypto market analysis, click here.
Disclaimer
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