Bitcoin Correlated with U.S. Fed as China Stimulus Lands: What China’s Rate Cuts Mean for BTC

The People’s Bank of China (PBOC) governor, Pan Gongsheng, announced a series of economic stimulus measures, prompting mixed reactions in global markets. While Chinese equities surged, Bitcoin (BTC) and ether (ETH) saw slight declines, highlighting a divergence between crypto markets and traditional stocks.

Early Tuesday, Bitcoin began to pull back from its weekly gains, dropping to $62,700 after reaching a near one-month high of $64,500. The decline followed China’s aggressive stimulus package, which includes a 50 basis point cut to the reserve requirement ratio for mainland banks and a 20 basis point reduction in the seven-day reverse repo rate to 1.5%. Additionally, the PBOC lowered the minimum down payment for mortgages to 15%.

Despite these significant measures, Bitcoin fell 2.2% over the past 24 hours, with other major tokens like ether (ETH), BNB (BNB), XRP (XRP), and Solana (SOL) also recording losses of up to 1.8%. However, analysts suggest that this decline is more related to profit-taking after a strong rally rather than China’s rate cuts.

While digital assets struggled, stock markets across China reacted positively to the PBOC’s measures. Hong Kong’s Hang Seng index climbed 3.2%, and the Shanghai Composite index rose by 2.3%, indicating that local traders are more focused on equities than crypto.

In a research note, Lynn Song, chief economist for Greater China at ING, suggested that the PBOC’s stimulus package could lead to a slight depreciation of the yuan, with the USD-CNY exchange rate expected to rise. However, she predicts that medium-term interest rate differentials may support a gradual appreciation of the Chinese currency.

According to Presto’s Maeda, the PBOC’s decisive actions come at a pivotal moment, especially with the Shanghai Stock Exchange recently dipping below the 2700 resistance level. The stimulus measures may provide much-needed support for China’s economy and financial markets.

Harris Presidency Unlikely to Be Bearish for Crypto

Meanwhile, traders at Singapore-based QCP Capital shared insights on the potential impact of a Kamala Harris presidency on the crypto sector. In a Monday market broadcast, QCP traders suggested that a Harris victory in the upcoming U.S. election may not be as bearish for crypto as some market participants expect.

“Kamala Harris has indicated her support for growing the crypto industry,” QCP noted. “Over the weekend, Harris vowed to help the crypto sector grow, potentially securing the crypto vote.” They also mentioned the involvement of prominent crypto advocates like Anthony Scaramucci in Harris’s campaign, indicating that her administration could foster innovation in digital assets while ensuring consumer protections.

During a recent fundraiser, Harris emphasized that if elected, the Democratic party would encourage the development of emerging technologies like artificial intelligence (AI) and digital assets, signaling a more favorable stance toward crypto than previously assumed.