Arthur Hayes: China Interest Rate ‘Bazooka’ Will Goose Bitcoin Prices
2025-01-05
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At its fourth quarter meeting on Dec. 27, the People’s Bank of China committee (POBC) proposed a more dovish (low interest rate) policy going forward.
At the same time, the US Fed has different plans.China Announces Interest Rate Cut
Financial analysts expect the bank to make adjustments to the target funds rate so that credit demand aligns better with monetary policy, according to Reuters. As a result, crypto analysts expect a big wave of monetary support for Bitcoin prices in the Middle Kingdom’s yuan printing press.
China’s central bank issued a statement on Friday announcing a cut to the banks’ reserve requirement ratio and interest rates at “a proper time.” The central bank says the PBOC is likely to further slash China’s interest rates from the current target of 1.5% sometime soon in 2025.
The PBOC last cut rates to 1.5% from 1.7% in September, the same month as the Federal Reserve pivoted to a rate-cutting regime. Moreover, China’s 10-year and 30-year treasury yields both hit record lows on Friday over expectations of fresh monetary easing.Arthur Hayes Predicts ‘Glorious’ Bitcoin Rally
The interest rate cut at China’s central bank will help to counter a deflationary yuan that threatens to spiral into debt-crippling loan revaluation. But, it will also push up the prices of the basket of financial goods, especially stocks and cryptocurrencies.
South Africa cut its main overnight money market rate by 0.25% to 7.75% in November.
BitMEX co-founder Arthur Hayes predicted the next rate cut in Beijing will combine with the Fed’s low rate regime and cause a “glorious” rally for Bitcoin and other crypto assets in 2025.
Hayes is an influential macro strategic analyst for the price levels of major cryptocurrencies such as Bitcoin and Ethereum.
Immediately after the US Federal Open Market Committee (FOMC) announced a rate cut in September, Bitcoin’s pricerocketed abovethe $60,000 level. Since then, the little orange coin has reached record high levels of $100,000.
Seven months ago in May, Hayes wrote on his Medium blog that when China brings out the monetary “bazooka,” buying a Wall Street Bitcoin ETF will be a no-brainer for regulated investors in the US.
“If my theory becomes reality, it is trivial for any institutional investor to buy one of the US-listed Bitcoin ETFs,” Hayes wrote. “Bitcoin is the best-performing asset in the face of global fiat debasement, and they know it.”
In addition to a rising Coinbase premium index, ETF flows for Bitcoin are two strong indicators that mainstream investors are flocking back to Bitcoin in January.