China: Further Monetary Easing Ahead

How Does China’s People’s Bank Impact Asset Markets and Cryptocurrencies?

A key question is whether Chinese Liquidity, and specifically PBoC (People’s Bank) Liquidity injections, affect World asset markets and the Bitcoin price? Bitcoin is, of course, a global asset and not a purely US one. What’s more, it partially acts like a commodity and has proved itself able to hedge monetary inflations. Hence, when China turns on her money taps could Bitcoin rebound?

We noted in the previous report how Granger causality tests reveal the high sensitivity of asset prices to changes in Global Liquidity, with the standout drivers being the US Federal Reserve and China’s People’s Bank. Admittedly, these causality tests show an earlier, statistically significant, impact from Fed Liquidity after around 6 weeks (p=0.107), but there is a later, unambiguous effect from changes in PBoC Liquidity after around 13 weeks (p=0.769). In this report, we focus on the influence of the People’s Bank of China. Our conclusion: needs, must.