The ¥500 billion funding scheme will allow financial institutions, including brokers, mutual funds, and insurers, to use their existing stock holdings as collateral to access liquidity.
China is seeking to stabilize its capital markets, and as such, the country has launched a ¥500 billion ($70.6 billion) liquidity program through its central bank, the People’s Bank of China (PBOC).
This program, first announced on September 24, is part of China’s broader efforts toward correcting declining stock prices as well as the economic challenges that the country currently faces.
China’s Liquidity Program and Its Impact on the Crypto Market
As of the time that the initiative was first announced, its major focus was the Chinese stock market. The ¥500 billion funding scheme will allow financial institutions, including brokers, mutual funds, and insurers, to use their existing stock holdings as collateral to access liquidity.
The idea is for institutions to have the opportunity to purchase shares while also unlocking liquid assets such as treasury bonds and central bank bills.
According to the PBOC, the program uses a variety of collateral, such as bonds, holdings in CSI 300 Index constituents, and stock ETFs. As long as the initial implementation proves successful, there will be room for additional rounds of funding, the bank added.
Interestingly, reports about the scheme immediately had an unexpected impact globally. Stock markets in the US and Europe reacted swiftly with positive movements. That is, as investors responded with optimism to China’s monetary easing measures.
The crypto market was not left out. Shortly after news broke about the PBOC’s stimulus package, Bitcoin BTC $89 956 24h volatility: 1.4% Market cap: $1.80 T Vol. 24h: $44.59 B broke its downtrend, hinting at a potential bullish period for the crypto sector.
While Bitcoin surged to $60,800 on PBOC’s announcement, it did suffer a minor setback thanks to the conflicts in the Middle East.
Despite this, analysts remain firm in their belief that the Chinese stimulus could maintain positive momentum for the crypto sector.
New PBOC Funding Scheme Sparks Hope for Bitcoin and Global Markets
The PBOC is already considering adding another ¥500 billion to the stimulus. This move potentially pushes the total liquidity injection beyond ¥1 trillion.
Historically, however, major monetary stimulus efforts have had very notable effects on Bitcoin. Sometimes, it increases BTC prices by over 100%. So, this time is not expected to be any different.
This explains why market analysts from QCP Capital project that additional Chinese liquidity measures would likely boost bullish sentiment in crypto and other risk assets. If the prediction is anything to go by, then Bitcoin’s price may surge significantly in the coming weeks.
At the moment, Bitcoin’s price is holding steady, but many traders remain optimistic for the near future.
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