China’s central bank made a major move to support its economy, releasing the largest liquidity injection it has ever performed. The country’s economy has been struggling since the COVID-19 epidemic and other economic difficulties. China’s economy is second-largest in the world, and it has grown at a faster rate than the United States.
With assets of approximately $6 trillion, the People’s Bank of China is the third largest central bank in the world. Global liquidity is affected by its actions. However, many analysts are focusing on the impact of tightening efforts from the US Federal Reserve on risk assets. This narrow focus ignores the magnitude of East’s easing measures.
The liquidity being released by China and Japan’s central banks is far more than that of the US Federal Reserve. Investors can gain a greater understanding of the markets if they consider global liquidity instead of the US economy as a whole, especially in relation to cryptocurrency.
Although the Federal Reserve is tightening its measures have created a risk-off attitude, the global liquidity is increasing due to the easing measures by the third- and fourth-largest central bank. This is especially true for cryptocurrencies which are not tied or tied to any particular economy or entity but are driven by liquidity-seeking behavior. Investors looking to make high-risk investments may invest in cryptos. This is likely to happen in China this fiscal year as the country recovers after COVID-19.
China’s economic recovery started with the abandonment of its ‘zero covid” policy in late 2022. The country’s rapid growth in the 21st Century has been disrupted by lockdowns in 2022. However, investors could reap the benefits of the significant injections of liquidity provided by the PBoC.
When analyzing market trends, analysts and investors need to have a wider perspective of the global economy, especially in relation to the effect of central bank policies on liquidity. Investors can make informed decisions about cryptocurrency markets by studying the actions of the major central banks in the world, especially the ones in Asia. China’s central banking system is the new player and could have profound implications for the global economy as well as various investment opportunities.