PBOC Rate Cuts: What It Means for the Future of Cryptocurrencies?
With key central banks making calculated moves, the financial markets are about to enter a new monetary easing cycle. It is now the turn of the People’s Bank of China (PBOC) to take over after the U.S. Federal Reserve started lowering its key rates last September. To boost the economy and combat the yuan’s rising deflation, which concerns Chinese officials and undermines investor confidence, Beijing intends to lower interest rates once more.
Macroeconomic economist and BitMEX co-founder Arthur Hayes predicts a domino effect in financial markets due to this circumstance. He believes that this cash infusion and a reallocation of institutional capital could lead to a significant surge in the cryptocurrency market in 2025.
Hayes: China’s Rate Cuts Could Drive Bitcoin to New Highs
Hayes sees a significant opportunity for the cryptocurrency sector in this Chinese monetary easing. He claims that lowering key interest rates in China will encourage a significant flow of money to safe havens, particularly gold and bitcoin. He thinks that investors will choose alternative assets in an effort to safeguard their cash when fiat currencies devalue.
He expands on this argument in a Medium piece, asserting that American institutional investors will be forced to purchase Bitcoin ETFs when China uses its monetary bazooka. According to him, big fund managers can no longer ignore the fact that bitcoin is currently the best-performing asset in comparison to the depreciation of fiat currencies. This assertion is predicated on a crucial finding: the price of bitcoin has already significantly increased as a result of the U.S. Federal Reserve’s recent rate reduction.
How Liquidity Infusion from Central Banks Could Propel Bitcoin’s Growth?
In the meantime, the US Federal Reserve is following China’s lead. In order to control inflation, the Fed tightened monetary policy for a while before starting a cycle of rate cuts in September 2024. Expectations of a more favorable climate for riskier and alternative assets, such as cryptocurrencies, are strengthened by the convergence of the monetary policies of the two biggest global economic powers. Many analysts think that by making Bitcoin a more appealing store of value in the face of traditional currency swings, this liquidity infusion could help the cryptocurrency.
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