Key takeaways:
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China’s central bank stimulus could redirect liquidity into cryptocurrencies.
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Rising US Treasury yields suggest lower risk aversion, supporting potential recovery in altcoin markets.
Central banks stimulate growth by reducing interest rates or enabling special financing conditions, effectively increasing the money supply. This dynamic benefits risk assets such as stocks and cryptocurrencies.
Traders now question if the Chinese central bank’s next move will provide the liquidity boost that finally drives altcoins beyond their previous all-time highs.
Economic Stimulus: A Boon for the Cryptocurrency Market
In a March 2025 report, 21Shares identified a striking 94% correlation between Bitcoin’s (BTC) price and global liquidity, surpassing both the S&P 500 and gold. This correlation suggests that when central banks implement measures to increase liquidity, cryptocurrencies could experience significant price movements.
Altcoin market capitalization, excluding stablecoins, USD. Source: TradingView / Cointelegraph
According to Porkopolis Economics, the current US M0 monetary base stands at $5.8 trillion, with the eurozone at $5.4 trillion, China at $5.2 trillion, and Japan at $4.4 trillion. With China accounting for 19.5% of global domestic product, its monetary policy decisions play a crucial role in the global economy, even amid the dominant influence of the US Federal Reserve.
Top monetary assets, USD. Source: Porkopolis Economics
On Thursday, China reported a 0.1% decline in July retail sales compared with the previous month. Goldman Sachs estimates show a 5.3% year-over-year decline in fixed asset investments in July, the steepest contraction since March 2020. Meanwhile, industrial production rose by just 0.4% during the month. Additionally, China’s survey-based urban unemployment rate climbed to 5.2% in July, up from 5% in June.
Bloomberg Economics analysts Chang Shu and Eric Zhu noted that the People’s Bank of China (PBOC) could introduce stimulus measures “as soon as September.” Similarly, economists at Nomura and Commerzbank argued that stronger support policies are imminent. However, even with the PBOC adopting a more expansionist stance, cryptocurrency investors may remain cautious if global recession fears intensify.
US Consumer Sentiment and Market Resilience
The University of Michigan’s consumer survey, released on Friday, revealed that 60% of Americans expect unemployment to worsen over the next year—a sentiment last seen during the 2008–09 financial crisis. Despite this, markets have shown resilience. The S&P 500 reached a new all-time high, and yields on 5-year Treasurys increased, indicating a tilt towards optimism among investors.
US 5-year Treasury yields. Source: TradingView / Cointelegraph
Typically, rising recession fears lead to increased demand for US government-backed assets, allowing investors to accept lower yields. After dropping to 3.74% on Aug. 4, the lowest in over three months, 5-year Treasury yields rebounded to 3.83% on Friday. This movement suggests reduced risk aversion, potentially paving the way for a rebound in altcoin market capitalization.
If China implements stronger stimulus measures, the ensuing liquidity could trigger a broad shift into risk assets. Such a move by the PBOC might be sufficient to propel cryptocurrencies to new all-time highs.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Source: Cointelegraph
