Bitcoin climbed above $97,000 on Wednesday before settling back to $96,000, as markets reacted to China’s liquidity injection and speculation over potential U.S. Federal Reserve monetary policy shifts.
The surge coincided with China’s announcement of a $138 billion economic stimulus package.
This has intensified debate over global macroeconomic stability ahead of a Federal Open Market Committee (FOMC) meeting.
China’s Stimulus and Bitcoin’s Reaction
The People’s Bank of China (PBOC) announced a series of monetary policy adjustments, including a 0.5 percentage point reduction in the reserve requirement ratio, effectively releasing 1 trillion yuan ($138 billion) in long-term liquidity.
- Additionally, it lowered the policy interest rate by 10 basis points and cut the seven-day reverse repo rate from 1.5% to 1.4%.
- To further bolster economic activity, China introduced a 500-billion-yuan re-lending tool for elderly care and consumption, alongside mortgage rate reductions and auto financing support measures.
- The timing of these announcements was strategic. Just hours earlier, U.S. Treasury Secretary Scott Bessent confirmed upcoming trade talks with Chinese Vice Premier He Lifeng in Switzerland, marking the first formal trade discussions since President Donald Trump raised tariffs on Chinese imports to 145%.
“Thanks to POTUS, the world has been coming to the U.S., and China has been the missing piece—we will meet on Saturday and Sunday to discuss our shared interests. The current tariffs and trade barriers are unsustainable, but we don’t want to decouple. What we want is fair trade,” Bessent stated.
Market Volatility and Fed Uncertainty
Markets responded swiftly. According to The Kobeissi Letter, S&P 500 futures surged over 1%, triggering Bitcoin’s climb past $97,000 before it pulled back. As of this writing, BTC is trading at $96,497, up 2.16% over the last 24 hours.
- Bitcoin’s retraction to the $96,000 range comes amid growing uncertainty surrounding the Federal Reserve’s next steps. Traders and analysts are closely watching the FOMC meeting, where discussions on interest rate policy and liquidity injections are expected.
- Meanwhile, the Fed’s balance sheet movements have raised eyebrows, as it quietly purchased $34.8 billion in Treasury notes over two days—$14.8 billion in 10-year notes on May 6 and $20 billion in 3-year notes on May 5.
- With no formal announcement, these acquisitions signal a subtle liquidity injection, raising speculation that the Fed is leaning toward an indirect quantitative easing (QE) strategy.
What you should know
Arthur Hayes, former CEO of BitMEX, sees the Fed’s dovish stance as wildly bullish for crypto.
- In a recent column, Hayes projected that Bitcoin could reach $250,000 by the end of 2025, if the Federal Reserve fully resumes QE.
“The Fed’s liquidity moves are the beginning of that process,” Hayes argued, suggesting that Bitcoin’s upward trajectory is closely tied to monetary policy adjustments.
As global financial markets navigate China’s stimulus, U.S. trade talks, and Federal Reserve decisions, Bitcoin’s price action remains highly sensitive to macroeconomic developments, reinforcing its status as a leading indicator of liquidity trends.