Bitcoin (BTC) prices appear to have maintained a significant positive correlation with the growth of China’s central bank balance sheet over the past eight years, with a 30-day correlation coefficient reaching 0.66. Currently, the People's Bank of China (PBOC) balance sheet is approximately $6.22 trillion, with exceptions to this correlation in 2016 and late 2022 through 2023.
In comparison, Bitcoin’s correlation with the Fed’s balance sheet is -0.88, the lowest level since 2016. A strong correlation is generally considered to be 0.6 to 0.9, with 0.8 to 1 considered very strong.
It is worth noting that PBOC recently stated that it would inject up to 1 trillion yuan (approximately US$142 billion) into major state-owned banks and lower the deposit reserve ratio and reverse repurchase rate to stimulate the economy. Bitcoin is up nearly 3% this week and more than 10% this month, according to CoinDesk data. Asian stocks also rose, driven by Chinese stimulus measures.
These stimulus measures are likely to attract more investment in blockchain and crypto assets, with global risk assets also expected to benefit. The head of SOFA Insights said that investment sentiment is turning to "buy the lows" and there are few obvious downside risk catalysts.