Bitcoin Optimism Fades: Impact of China's Recent Stimulus Under Scrutiny
BCA Research analyzes China's latest stimulus measures and their insufficient effects on generating bullish credit impulses as seen in previous years.
China's latest stimulus measures appear lackluster compared to the actions taken during the 2015 cycle, as observed by BCA Research. The current housing market downturn restricts the country's ability to produce significant bullish credit impulses. This trend is reflective of a long-term decline in credit impulse, which peaked at 25% back in 2008.
Recently, China announced a series of stimulus measures, the most substantial since 2008, which ignited a rally in Chinese stocks and globally risk assets, including Bitcoin. Analysts anticipate that these measures, along with Federal Reserve rate cuts, could potentially drive Bitcoin (BTC) to $100,000 within a few months.
However, BCA Research contends that the optimism surrounding this rally may be misplaced as the new stimulus fails to generate the type of bullish credit impulses that characterized earlier cycles, such as in 2015. The lack of a robust credit impulse, a crucial indicator reflecting the flow of new credit issued, limits economic growth and the likelihood of significant market rallies.
These credit impulses have historically signaled the bottom of Bitcoin bear markets, but the latest figures show that the current credit impulse peaked at less than 5 trillion yuan—significantly lower than the 15.5 trillion yuan peak of 2015 that translated to 15% of the GDP at that time.
For a substantial upward shift reflecting the dynamics of the 2015 cycle, the newest measures would require a peak five times higher according to BCA's analysis.
The challenge remains that conditions that previously fostered credit growth, such as the housing boom, are no longer present, complicating the effort to restore credit impulses to previous highs. As noted by analysts, "Through 2000-2020, when China’s housing boom was in full swing, it was possible to channel the exponential credit curve into the housing and construction boom. But now, absent an alternative destination for the productive use of credit of the same magnitude, it will be difficult to generate those same monster credit impulses."
