Key Takeaways
Potential stimulus from China’s central bank could channel liquidity into cryptocurrencies.
Rising U.S. Treasury yields reflect reduced risk aversion, which may support a recovery in altcoin markets.
Central banks stimulate growth by lowering interest rates or introducing special financing programs, which expand the money supply. Such measures tend to benefit risk assets, including stocks and cryptocurrencies. Traders are now watching closely to see whether the People’s Bank of China (PBOC) will deliver the liquidity boost needed to drive altcoins beyond their previous all-time highs.
Stimulus and Crypto Markets
A March 2025 report from 21Shares revealed a strong 94% correlation between Bitcoin’s price and global liquidity—higher than its correlation with either the S&P 500 or gold.
Currently, the U.S. monetary base (M0) stands at $5.8 trillion, followed by $5.4 trillion in the eurozone, $5.2 trillion in China, and $4.4 trillion in Japan, according to Porkopolis Economics. With China accounting for nearly 20% of global GDP, its monetary policies remain highly influential, even as the U.S. Federal Reserve captures most of the headlines.
China’s Economic Signals
Recent Chinese economic data shows weakness: July retail sales fell 0.1% from the prior month, while fixed-asset investment declined 5.3% year-over-year—the steepest drop since March 2020. Industrial production rose just 0.4%, and the urban unemployment rate climbed to 5.2% from 5% in June.
Bloomberg Economics analysts Chang Shu and Eric Zhu suggested the PBOC could roll out stimulus measures as early as September. Economists at Nomura and Commerzbank echoed this view, noting that stronger policy support appears inevitable. However, even with looser monetary policy, investor appetite for crypto could remain muted if global recession risks intensify.
U.S. Sentiment and Market Behavior
The University of Michigan’s latest survey shows that 60% of Americans expect unemployment to worsen over the next year—a pessimism not seen since the 2008–09 financial crisis. Despite this, financial markets remain resilient: the S&P 500 closed at a record high, and 5-year Treasury yields edged higher.
Typically, when recession fears grow, investors flock to U.S. government-backed securities, driving yields lower. Yet after falling to 3.74% on August 4, the lowest in over three months, 5-year yields have rebounded to 3.83%. This signals reduced risk aversion, creating room for a potential rebound in altcoin capitalization.
Outlook
If China launches a robust stimulus program, the resulting liquidity could ignite a broad rotation into risk assets. In that case, PBOC’s actions might provide the spark that pushes cryptocurrencies to new all-time highs.