Bitcoin (BTC), the largest cryptocurrency by market cap, witnessed a significant surge in price shortly after the People’s Bank of China announced its stimulus packages.
Bitcoin has begun to shed its weekly gains after soaring to about a one-month high of $64,700 early Tuesday as China unveiled fresh stimulus packages to revive its slowing economy. However, the largest cryptocurrency has since fallen back to about $62,700 at press time.
China Announced Stimulus Packages To Revive Slowing Economy
On Tuesday, September 24, Pan Gongsheng, the governor of the People’s Bank of China (PBOC), announced two fresh stimulus measures to revive the country’s economy.
According to the announcement, China’s central bank said that it will pump at least 800 billion yuan of liquidity support into the country’s financial system by cutting the reserve requirement ratio (RRR) by a 50-basis point.
Pan also mentioned that he would lower the seven-day reverse repo rate by a 20-basis point to 1.5%. For context, the seven-day reverse repo rate is the interest rate at which PBOC borrows money from commercial banks.
Moreover, PBOC mentioned that it would reduce the minimum down payment requirement for mortgages to 15%.
This announcement comes after a growing alarm within Xi Jinping’s government over the slow economic growth and low investor confidence.
Bitcoin Rallied Strongly Following The Announcement
Following the announcement of the stimulus packages, the price of Bitcoin (BTC) soared to almost a one-month high of $64,700.
Real Vision’s crypto analyst, Jamie Coutts, argued that the Chinese fresh stimulus packages are bullish for Bitcoin, mentioning that it would influence the central banks of other countries to do the same.
Jamie added that the announcement of China’s stimulus packages has always preceded a huge surge in risky assets like Bitcoin.
For instance, in October 2023, when China injected $367.7B into the economy via reverse repos, and in January 2024, when it ingested $140B by reducing the RRR by a 50-basis point, the price of Bitcoin surged by over 100% in both cases.
That means the performance of Bitcoin is closely tied to global liquidity conditions.
However, the bullish movement was short-lived as the price of Bitcoin fell shortly after to about $62,700. Currently, Bitcoin is trading at about $63,500.
Bitcoin fell over 2%, and other major altcoins also suffered losses. Ethereum, BNB, Ripple XRP, and SOL lost almost 1.8%. Such a drop in price is common after a significant surge.
Yesterday, it was reported that the price of Bitcoin rose to about $64,800 early Monday morning before dropping to about $63,800 just 2 hours later. This shows that Bitcoin is facing strong resistance at $64K.
This may also explain the reason why Bitcoin did not maintain its position above $64K today.
