China’s recent stimulus measures have sparked optimism in global financial markets, and according to analysts at QCP Capital, the results may soon extend to the cryptocurrency space.
While stock indices have responded well to China’s economic policies, the crypto market has yet to see a similar surge. However, QCP Capital believes that the next phase of stimulus from China’s central bank may further fuel the bullish outlook for risk assets, including crypto.
Possible Crypto Market Upsurge
In a post uploaded earlier today on its Telegram channel, QCP Capital noted that the People’s Bank of China (PBoC) is expected to release more stimulus, which, combined with the easing of other major banks, could inject more capital into global markets.
Despite the waning of upward momentum in the cryptocurrency market, Bitcoin remains hovering just above $63,000, QCP Capital analysts predict that the surge in digital currency prices may catch many investors off guard.
They emphasized the “explosive” nature of crypto price movements and how many could be surprised and sidelined by a possible rally driven by various bullist catalysts. The company wrote:
Although there is currently a lack of costs driving the idiosyncratic aspects of crypto, the stars are aligning in the macro area, which may increase crypto prices. We know how explosive crypto prices can be, and with so many catalysts, we think the next move higher will leave many people surprised and on the sidelines.
Yield Spreads Suggest Optimism About Risky Assets
The QCP Capital report also highlighted a key macroeconomic indicator: the widening spread between the 2-year and 10-year yields on US Treasury notes.
This yield spread, which has increased by 40 points in the past month to 21 points, shows “possible optimism” about economic growth, according to QCP analysts.
Widening yield spreads generally suggest a favorable environment for risky assets such as stocks and cryptocurrencies in the medium to long term. Additionally, China’s comprehensive policies to stimulate its housing and capital markets are already having positive results.
QCP points out that the SSE Composite Index, for example, saw an increase of 4.15% yesterday, reflecting investor confidence in the country’s recovery. If the effects of China’s stimulus measures spread to the crypto market, this could accelerate the bullish phase of Bitcoin and other digital assets.
Speaking of Bitcoin, the asset has consistently risen and fallen below and above the $63,000 mark. After seeing a sudden surge above $64,000 following US feed rate cuts, the stock seems to have seen a cooling off in the rally, as the price is now trading at $63,738, up just 1.1%.
The featured image was created with DALL-E, a Chart from TradingView