The stock market crash in China triggers a surge of interest in Bitcoin – Here’s what you should know.

in brief

  • It’s reported that China is tightening trading rules for domestic institutions and certain offshore entities to curb market turmoil.
  • This move follows a sharp decline in stock prices to a five-year low last Friday.
  • Additionally, analysts are closely scrutinizing the upcoming Bitcoin block subsidy halving, a significant concern for the cryptocurrency community, despite it being over two months away.

China’s recent stock market crash, witnessing an 8% plunge in stocks within hours, has raised concerns not only domestically but also globally, especially for Bitcoin. Five crucial factors stemming from this crisis shed light on its broader implications for Bitcoin and its investors, vital for navigating the evolving landscape of traditional and digital financial markets.

China’s economy teeters on the brink in the market.

Sources familiar with the situation report that China is implementing stricter trading regulations on domestic institutional investors and certain offshore entities in an effort to halt the decline in the stock market.

This week, authorities have imposed limits on cross-border total return swaps between certain brokerages and clients, effectively preventing China-based investors from short-selling Hong Kong stocks through this channel. The sources, who requested anonymity due to the sensitivity of the topic, provided this information.

Simultaneously, several Chinese brokers utilizing this channel to acquire mainland shares for their offshore units have been instructed not to reduce their positions, as per the same sources.

Beginning Monday, certain quantitative hedge funds faced restrictions, preventing them from placing sell orders entirely, while others were prohibited from reducing stock positions in their leveraged market-neutral funds. These trades, referred to as a Direct Market Access approach, are believed to have intensified the recent sell-off in small-cap stocks.

Amid chaotic trading on Friday, China is striving to stabilize markets following a plunge in stock prices to a five-year low. These recent measures supplement officials’ incremental attempts to mitigate a three-year decline that has resulted in the loss of $7 trillion in value and undermined confidence in the world’s second-largest economy.

Bitcoin’s market in the midst of China’s troubles

Bitcoin kicks off the first week of February with a rebound from a dip below $42,000. Some anticipate significant changes, suggesting Bitcoin could surpass local resistance and hit a new all-time high by mid-April. Others advocate for a “business as usual” approach, expecting no major price shifts until months after the halving.

Ongoing macroeconomic uncertainties, compounded by this week’s turmoil in China’s equity markets, continue to weigh on sentiment. With surprising US data affecting markets, attention is on the Federal Reserve’s economic policy evolution, particularly regarding the timing of interest rate adjustments, crucial for cryptocurrencies and risk assets.

As of now, Bitcoin is valued at $42,806.66, slightly down from earlier, but up 2.1% from a week ago. The total Bitcoin trading volume over the past 24 hours stands at $16,860,975,629.

The global crypto market cap is $1.73 trillion, showing a 0.29% increase in the last 24 hours and a significant 56.09% increase from a year ago. Bitcoin’s market cap is $841 billion, representing a dominance of 48.65%, while stablecoins account for $137 billion, making up 7.92% of the total crypto market cap.

The upcoming halving of the block subsidy, scheduled for April 18, is a major topic among Bitcoin enthusiasts. Analysts are already speculating on its potential impact on market psychology, although it’s over two months away, with predictions for BTC price action varying widely.

Currently, ETF products worldwide hold over 3% of the total BTC supply, with BlackRock and Fidelity, the United States’ asset managers, owning three-quarters of the newly acquired BTC.

Excluding the newly converted ETF Grayscale Bitcoin Trust (GBTC), which continues to experience notable withdrawals, this statistic stands.

Despite Bitcoin’s price remaining relatively stable, changes are on the horizon, as evidenced by observations of whales. Santiment, a research firm, identified significant shifts in the composition of whale populations over the past week.

The count of wallets holding 1,000 BTC to 10,000 BTC has surged to levels not seen since November 2022, while the number of wallets holding 100-1,000 BTC has notably declined since that time. The figures stood at 1,958 and 13,735 wallets, respectively.

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