China’s stock market has surged following the government’s recent economic stimulus aimed at reviving its struggling economy. Both the Shanghai Composite Index and the Hang Seng China Enterprises Index saw significant gains. However, instead of boosting the cryptocurrency market as some predicted, the stimulus appears to have shifted investment away from it—especially from Bitcoin.
The question now is: Is this capital shift temporary?
The major stock indexes in China, the Shanghai Composite Index and the Hang Seng China Enterprises Index, have surged since the government introduced its economic stimulus package.
On September 24, People’s Bank of China Governor Pan Gongsheng announced the plan to save the economy from a potential collapse. This announcement came after reports highlighted the severe challenges facing China’s economy, restoring hope that the country could still hit its 5% growth target this year.
On September 24, the Shanghai Composite Index stood at 2,770.43. It has since risen to 3,336.49, an increase of 20.43%. The market had been largely stagnant until September 13, but strong buying began on September 18, driving positive momentum ever since.
The Hang Seng China Enterprises Index followed a similar pattern, though buyers entered this market earlier, around September 10. At that point, the index was at 6,036.14. By the time the stimulus was announced, it had already hit a monthly high of 6,723. Since then, the index has jumped by 23.9%, reaching 8,330.85.
Recent reports indicate that investors are moving funds from stablecoins like USDT into Chinese stocks, eager to take advantage of the market rally. This shift has reduced investment flowing into the crypto market, particularly into Bitcoin.
On September 24, Bitcoin (BTC) was trading at about $64,253. While it briefly rose to $65,903 on September 28, it then fell sharply, hitting a low of $60,658 by October 2. The market has struggled to recover, with BTC currently priced at $63,432.63—significantly lower than it was when China’s stimulus was announced.
Some analysts believe that the focus on Chinese stocks is limiting Bitcoin’s growth. Danny Chong, co-founder of Digital Asset Association Singapore, thinks this capital shift is temporary. He expects that once the Chinese stock market stabilizes, the crypto market will regain its momentum.
However, others are skeptical about the long-term impact of China’s stimulus. Analysts from TS Lombard and BCA Research have questioned whether the stimulus can fix the deeper problems in China’s economy. They’re also unsure whether the stock market’s current rally can be sustained.
While China’s stock market surge may have temporarily pulled investment away from Bitcoin, many analysts believe this shift won’t last. As China’s markets stabilize, it’s expected that capital will flow back into the crypto market, reigniting bullish trends for Bitcoin and other digital assets.
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