China’s Economic Stimulus Package Triggers Cryptocurrency Swings Amidst Speculation of Global Impact

June 21, 2023

By Anjali Kochhar

In recent weeks, the cryptocurrency market has been gripped by speculation and volatility as rumours circulate about a clandestine U.S. “alliance to destroy crypto.” While Bitcoin (BTC) and other top cryptocurrencies such as Ethereum, BNB, XRP, Cardano, Dogecoin, Tron, Solana, and Polygon’s Matic experienced significant gains, their rally abruptly halted, prompting a warning from Coinbase, a prominent cryptocurrency exchange.

Meanwhile, the U.S. Federal Reserve’s indication of forthcoming interest rate hikes, coupled with a staggering $1.1 trillion shock, has sparked expectations of an economic stimulus plan from China that could have profound effects on various assets, including cryptocurrencies.

According to Chamath Palihapitiya, a former Forbes billionaire, China has declared its intention to “rip in trillions of dollars,” as he disclosed on the All-In Podcast alongside fellow investors Jason Calacanis and David Friedberg. Palihapitiya stressed that if China initiates extensive quantitative easing measures, it will have an inflationary impact on the global economy due to its vital role as a critical artery in the world’s financial system.

Recently, China’s state council announced its consideration of an economic package aimed at bolstering its post-pandemic recovery and expanding “effective demand.” The announcement was made through a statement released by the state news agency Xinhua.

Palihapitiya argued that with China actively printing trillions of dollars, a hard landing for the economy becomes improbable. His assessment stems from the belief that China’s economic stimulus measures would inject substantial liquidity into the system, preventing any sudden downturns.

The influence of central banks’ pandemic-era stimulus measures, including those of the Federal Reserve, played a pivotal role in the surges experienced by Bitcoin, Ethereum, BNB, XRP, Cardano, Dogecoin, Tron, Solana, and Polygon’s Matic in recent years. However, the crypto market faced a significant setback in 2022 when the Federal Reserve initiated tightening monetary policies to combat mounting inflation, leading to a $2 trillion market value wipeout.

Although the Federal Reserve recently paused its consecutive interest rate hikes, Fed Chair Jerome Powell cautioned that further increases were likely in the future. Powell emphasised the substantial impact of their tightening policies, acknowledging that the full effects were yet to be felt.

As investors and traders navigate this uncertain landscape, the allure of cryptocurrencies remains strong, given their potential for exponential growth. The market’s response to China’s anticipated economic stimulus package and the Federal Reserve’s monetary policies will undoubtedly shape the trajectory of cryptocurrencies, with many closely monitoring their swings in the days to come.

About the author

Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.

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