China’s Stimulus Sparks Stock Rally but Limited Impact on Bitcoin Due to Credit Constraints
Recent financial stimulus measures from China, the largest since 2008, have led to a rally in Chinese stocks and global risk assets, including Bitcoin. Initially, speculators shifted focus from Bitcoin to Chinese A-shares due to the economic stimulus and liquidity injection leading to high volatility in Chinese stocks. Despite this optimism, BCA Research analysts suggest that the current stimulus might not significantly boost ’credit impulses’ as in past cycles like 2015, due to a structural downtrend in credit impulses and the absence of a significant sector to absorb massive credit, such as the previous housing boom. Historically, credit impulse correlates with economic growth and Bitcoin’s bullish phases. However, to equate the 2015 cycle effects, credit impulse would need to hit 27 trillion yuan, far exceeding the sub-5 trillion yuan peak of recent measures. China’s potential to invigorate a risk-on environment for Bitcoin appears constrained, suggesting limited long-term bullish impact.
Neutral
The news about China’s latest stimulus shows initial optimism in Chinese stocks and risk assets, but analysts caution about the limited potential for sustained bullish impact on Bitcoin. With the structural downtrend in credit impulses and the lack of supporting sectors for credit absorption, the capacity for these stimuli to match the effects of previous cycles like 2015 is restricted. Therefore, while short-term speculative shifts may influence Bitcoin’s pricing, the long-term outlook remains stable, resulting in a neutral impact assessment for crypto traders.