Chinese stock markets have started to show signs of slowing down following a disappointing stimulus package announcement, leading to speculation about a shift towards Bitcoin [BTC] and cryptocurrency trading.
Throughout late September, Asian stocks experienced a surge in value driven by strong stimulus packages from the Chinese government and expectations of their continuation into 2024.
An economist and market analyst, Alex Kruger, revealed that there were anticipations of an additional $1.4 trillion in fiscal stimulus from the Chinese government. However, only a $14 billion package was unveiled, leaving investors disappointed.
This turn of events has dampened market sentiment, causing many Chinese stocks to retrace their recent gains. How could this impact BTC and cryptocurrency trading?
China’s Impact on the Crypto Market
Recent reports from Bloomberg suggest that the slowdown in Chinese stocks might have prompted some crypto investors to shift their focus towards these thriving equities. The analysis pointed out the observed discount of Tether’s USDT against the US dollar (USD) since late September as a significant indicator.
One expert interpreted this as a result of China’s quantitative easing measures, potentially leading to a scenario of “panic buying” in Chinese stocks.
“If traders are rushing to convert their holdings back into fiat currency, it implies a sense of panic buying within the Chinese stock market.”
Consequently, it is likely that investors sold off their USDT holdings to invest in Chinese stocks. With the temporary halt in the Chinese market rally, will they now return to BTC and cryptocurrency trading?
QCP Capital, a crypto trading firm based in Singapore, believes that the slowdown in the Chinese stock market could drive a surge in BTC. The firm remarked,
“With the Chinese market cooling down, we forecast a shift of capital back to the crypto sector, showcasing its increasing maturity as an alternative risk-on asset class.”
However, the firm also cautioned that the upcoming earnings season and the release of September US CPI data on 10 October could pose risks to the crypto market’s outlook.
Meanwhile, the BTC Korean Premium Index displayed a V-shaped reversal pattern in real-time. It had risen above the neutral level after experiencing a decline in the initial week of October.
This index, also referred to as the Kimchi Premium, monitors the price variations of BTC between South Korean and international exchanges. A higher premium indicates a stronger demand for BTC in Korea compared to foreign markets.
The recent positive signal suggested a limited demand for the asset in Korea. At the current moment, BTC was trading at $62.5k, reflecting a marginal 1% decrease on weekly charts.