The economic stimulus packages announced by the Chinese government have caused a significant increase in the stock market. It is thought that investors' turn to the Chinese stock market has caused a stagnation in the Bitcoin and cryptocurrency markets. However, experts predict that this situation may be temporary and capital will return to cryptocurrencies.
Recent economic incentives have revived the stock market, which has been weak for a long time. However, some experts believe that this revival could have a negative impact on the cryptocurrency market. While Bitcoin is currently trading at $62,997, it is stated that one of the factors limiting the rise in Asian markets is the shift of capital to Chinese stocks.
The Chinese stock market has seen a strong recovery in recent days. The Shanghai Composite Index, in particular, has increased by over 20% since September 24, reaching its highest level since May 2023. The Hang Seng China Index, traded in Hong Kong, has also increased by over 25%. This increase came after the Chinese government announced a major stimulus package; steps such as interest rate cuts, liquidity support for banks and support for real estate prices have mobilized investors. However, it is observed that some of this capital flow has withdrawn from the cryptocurrency market.
Eric Yee of Singapore-based Atlantis Investment Management said investors are reducing their long positions on other Asian exchanges to invest in Chinese stocks. That’s dampening interest in riskier assets like Bitcoin as investors are drawn to the potential for profits in China.
Capital May Return to Cryptocurrency Market
However, some experts believe that this situation is temporary. Danny Chong, co-founder of Digital Assets Association Singapore, said that the capital shift will not last long and that investors will return to cryptocurrencies once the volatility in the Chinese stock market subsides. “Investors are trying to maximize their gains by switching between asset classes. Once the peak is reached in Chinese stocks, we may see capital flowing back into the cryptocurrency market,” Chong said.
However, traditional market analysts argue that the Chinese government’s latest stimulus may not be effective in the long term. They say that these measures will be limited unless the economic problems are fundamentally addressed. It is thought that the incentives will not be sustainable in the long term, especially if the problematic balance sheets of banks are not fixed. Therefore, there are warnings that the current rise may be a short-term movement and may not be permanent unless China’s real economic problems are solved.
