- China’s economy continues to bleed out as investors seek alternative investments elsewhere.
- Crypto is geared to benefit as the chaos could become a driver to alternative assets, said crypto analyst Noelle Acheson.
The “bloodbath” on China’s stock markets could lead to more money flowing into Bitcoin investments, according to one analyst.
Noelle Acheson, author of the “Crypto is Macro Now” newsletter and former research head of Genesis, said Beijing’s attempts to stymie the haemorrhaging home market have so far proved unsuccessful — suggesting more forceful measures may eventually come.
“Broader stimulus, in contrast to the targeted approach so far, is likely to find its way into speculative and/or assets not tied to the Chinese economy,” Acheson wrote on Monday, pointing specifically to the crypto market as a beneficiary.
The comments add to investors’ bullish sentiment about the leading digital asset. Bitcoin could surge past its $69,000 all-time high in 2024 on the back of the spot Bitcoin exchange-traded fund mania, analysts from investment firm Bernstein suggested this week.
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Though Bitcoin has slumped slightly from its $49,000 January high to just below $42,800 today, that still represents an 85% recovery from the same period in 2023.
‘Abnormal market conditions’
The CSI 300 index, which tracks China’s largest 300 companies, is down 20% year-over-year. It fell about 9% on February 5 alone.
The CSI 1000 index tracks 1,000 of small cap-A companies listed on the Chinese Securities Index. It has dropped 28% since the year began.
Several factors have exacerbated the chaos.
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The Evergrande property scandal, growing tension between Beijing and Washington, and an opaque crackdown on the financial sector have all contributed to the situation, with Federal Reserve Chair Jerome Powell hinting that rate cuts are still some ways off.
On February 4, the China Securities Regulatory Commission pledged to crack down on “major illegal activities” and to “work with relevant parties” to “resolutely prevent abnormal market fluctuations.”
Acheson responded, “the promised support from the authorities is lacking in detail, and will most likely not be enough to turn sentiment around.”
During the turmoil, Chinese investors have poured money into products providing them with exposure to overseas equities, Acheson noted.
Elsewhere, Macau, an autonomous region of China known for its giant casinos, almost broke its post-COVID-19 revenue record in January, Acheson added.
“It’s not so much that Chinese investors don’t want to invest; it’s that they don’t have a lot of confidence in the Chinese stock market, despite official assurances,” Acheson said. “Foreign stock exposure is one avenue. Gambling is another. Crypto markets, on the other hand, could deliver the benefits of both.”
Sebastian Sinclair is a markets correspondent for DL News. Have a tip? Contact Seb at sebastian@dlnews.com.