Chinese Investors Switch To Bitcoin Amid Economic Troubles

Chinese investors turned to Bitcoin amid economic difficulties (Photo; Doc. Digital Market Reports)

JAKARTA - In the midst of China's continued slowdown in the economy, investors in the country have begun to switch to Bitcoin and other crypto assets as an alternative to protecting their wealth. A report from Chainalysis shows that over-the-counter (OTC) crypto brokers in China have experienced a surge in funding flows from local investors, although the country has banned Bitcoin trading since 2021.

According to a Chainalysis report, during the first nine months of this year, China's OTC brokers recorded an inflow of up to 75.4 billion US Dollars, with an average of 20 billion US Dollars per quarter until June 2023. Despite the official ban imposed in 2021, demand for Bitcoin and other crypto assets remains high among investors. Quoted from Coingape, Eric Jardine, lead cybercrime research at Chainalysis, explains that this activity is likely to operate in China's grainy'' economic area, considering the ban was not strictly enforced.

Many Chinese investors see Bitcoin as a safer hedge tool amid economic uncertainty. As China's People's Bank (PBoC) announced a series of stimulus policies, including a 50-base point (bps) cut in interest rates and a reduction in the ratio of mandatory reserves to banks, interest in Bitcoin is expected to increase.

The stimulus step taken by China's People's Bank appears to have a positive impact on Bitcoin. After this policy was announced, the price of Bitcoin rose to 64,000 US Dollars, with some analysts predicting that the stimulus could trigger further increases of up to 100,000 US Dollars. Market analysts from QCP Capital and figures such asorithm Pal from Real Vision, as well as Dan Tapioro, agree that this quantitative easing policy has the potential to increase investor confidence in Bitcoin.

In addition to domestic factors, China's international relations are also expected to encourage crypto adoption in the country. Russia, which strengthens trade relations with China, has expressed interest in using cryptocurrencies in international trade, replacing the US dollar. This adds to the reason that demand for Bitcoin in China will continue to rise.

In addition to domestic policy, China's move to cut interest rates was carried out shortly after the US Central Bank, Federal Reserve, also cut interest rates by 50 bps. This macro condition, coupled with a positive prediction of Bitcoin's performance in the fourth quarter, has many analysts believe that Bitcoin will reach a new high in the near future.

With demand remaining high among Chinese investors, despite the official ban, as well as stimulus policies fueling market optimism, Bitcoin seems to continue to be a key choice for investors seeking protection from global economic instability.