BTC Price Holds Steady as China Rate Cut Doesn’t Encourage Risk Taking

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Bitcoin (BTC) traded little on Tuesday as China’s first benchmark lending rate cut in 10 months failed to lift sentiment in traditional markets.

The People’s Bank of China (PBOC) cut the one-year and five-year prime lending rates by 10 basis points (bps) to 3.55% and 4.3%, respectively. The one-year rate is a medium-term lending facility for business and household loans and the five-year rate is the benchmark rate for mortgages. Last week, China’s largest state-owned banks cut rates on demand deposits by 5 basis points and 15 basis points on three- and five-year term deposits. A basis point is one hundredth of a percentage point.

The looser conditions contrast with continued monetary tightening in Western economies and follow recent economic reports that showed the world’s second-largest economy losing steam and on the brink of deflation.

Bitcoin, a pure play on liquidity, struggled to take a bullish direction. The largest cryptocurrency by market value changed hands near $26,819 at 07:27 UTC after failing to hold gains above $27,150 during Asian trading hours, according to data from CoinDesk.

The Australian dollar, which is sensitive to the Chinese economy due to strong trade ties between the two countries, fell 0.7% against the US dollar, and China’s benchmark stock index, the CSI, traded flat to negative. MSCI’s broadest index of Asia-Pacific stocks outside Japan fell more than 0.5% and S&P 500 futures traded down 0.3%.

The anti-risk action suggests investors aren’t sure the rate cuts will be enough to support the slowing economy and are looking for a bigger stimulus package.

“This could be the market’s way of saying the rate cuts reveal more problems than they are a solution to China’s recent economic woes,” ForexLive analyst Justin Low said in an update. market day.

Some crypto watchers say greater stimulus from China could offset hawkish biases from the US Federal Reserve, European Central Bank and others, possibly pushing risky assets higher.

“Reports also suggest that China is preparing a 1 trillion yuan stimulus package. This is BIG news for global liquidity,” said David Brickell, director of institutional sales at crypto-liquidity network Paradigm. , in the latest edition of Macro Pulse. One trillion yuan is about $140 billion.

“If global liquidity increases, bitcoin should start pumping hard from here,” Brickell added.

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