Bitcoin's on track for its best September ever, thanks to China's stimulus measures

By Frances Yue

Bitcoin was on track to record its best September performance in history, after China's government this week announced a series of stimulus measures to support the economy, while traders expect the Federal Reserve to deliver further rate cuts this year.

Bitcoin (BTCUSD) was up 12.3% so far this month through Friday, on pace for its best September performance since 2009 when bitcoin was launched, and the best month since May this year, when it rose 14.2%, according to Dow Jones Market Data.

The cryptocurrency, the world's largest by market capitalization, was up 58% so far in 2024, while it still was 10% away from its record high of $73,798 reached in March.

China on Tuesday announced a barrage of stimulus measures, including cutting short-term interest rates, reducing the amount of capital banks must hold in reserve and other support for the world's second-largest economy, and its struggling housing and equity markets.

The move by China to shore up its economy follows the Federal Reserve's first interest rate cut in four years earlier this month. While the odds favored 75 basis points of additional Fed rate cuts this year, fed-funds futures traders also had the chances of 100 basis points of additional easing in 2024 at almost 30% on Friday, according to the CME FedWatch tool. That was up from less than 6% a month ago.

China's stimulus package, coupled with potential further rate cuts in the U.S., would point to an increase of global liquidity, setting up a bullish environment for bitcoin and other risk assets, according to David Kroger, senior vice president at StoneX.

Meanwhile, Chinese traders remain an important part of the global crypto ecosystem, even though the nation attempted to ban crypto trading and mining since 2021. As evidence of this, China's over-the-counter crypto brokers have seen a total inflow of $75.4 billion in the three quarters through June, according to data from Chainalysis.

China's stimulus package could power up some Asian retail traders again, especially investors who have assets in China, said Darius Tabai, chief executive at decentralized crypto Vertex. Still, investors want to see more details about China's stimulus package, Tabai said.

In addition to bitcoin, smaller cryptocurrencies that have China ties, such as Tron and VeChain, could especially benefit, Kroger said in a call. Tron was founded by China-born entrepreneur Justin Sun, while VeChain was founded by Sunny Lu, former chief information officer of Louis Vuitton China.

-Frances Yue

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09-28-24 0800ET

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