How will the increases in Chinese exchanges affect Bitcoin and cryptocurrencies?
Monday, the Shanghai Composite index has experienced the most significant daily increase over the past five years. It had increased by a maximum of 5.7% since the last bull market of 2015.
Many market analysts warn that the bull run is similar to the 2015 Chinese stock market balloon. Since then, the Chinese government has encouraged retail investors to buy stocks.
Why Asian Stocks Increased Now?
Many factors explain the positive outlook for Asian stocks and especially Chinese stocks. The main causes stem from the effects of the COVID-19 outbreak and the subsequent crash.These events shook the trust of global investors in sectors that have so far been considered stable, such as tourism, airline companies, and main street retailers.
Check out service and tourism-oriented economies like Spain or Italy. The economic effects of the quarterly lockdown will appear to be worse than the virus itself. Investors seem to shift their focus to more production-oriented countries.
In addition, countries that manage the outbreak earlier will recover faster from the devastating effects of the crash. These countries will be in a better position after the 2020 Global Reset.The most obvious manifestation of this thought is in the USA. As the daily cases increase in July, the virus still looks wild.
In addition to the uncertainty surrounding the American economy and political leadership, Fed’s unstable dollar pressure also fuels the fire. These factors direct investors to Asia for reliable betting.
A recent Nomura research article notes:
“We are seeing a series of catalysts that will allow Japan-origin (AeJ) stocks to perform better in the near term to US stocks”Nomura also said, “Better COVID-19 trends and mobility data in economies / markets dominating the AeJ index should turn into faster economic recovery compared to the US”.
China: The World’s New Financial Center
One of the announced targets of the Chinese government is to increase the size of the financial sector. More ambitious is making Shanghai the epicenter of Asian trade. However, the ultimate goal is to pass New York between 2040 and 2050.
There is a long way to pass, but Chinese regulators are moving slowly. The first step is to open a stock market to a hungry global investor group who is desperate to get good returns in a low growth environment.Recently, Beijing regulators relaxed rules on margin financing, allowing investors to find borrowed funds.
In a recent interview with Reuters, financial analyst Ma Ting Ting said:
“We expect regulators to continue to increase their stock market activities and try to direct more funds from banks and insurance companies to the stock market… The signal from the regulators is clear: they are pressuring to develop margin trading and short selling business in China.”
Another feature to keep in mind is that 99% of all investors on Chinese exchanges are Chinese individuals. This can be interpreted as a sign of strength as it protects domestic markets from negative external sensitivity. On the other hand, analysts are flagging about the validity of this bull pressure.The state-owned Chinese Securities Magazine published an article on Monday claiming:
“Developing a healthy bull market is important to create new opportunities… and the economy needs a healthier bull market than ever before in the world after COVID-19.”
Some of the big winners of the recent increase in Chinese stocks were Shanghai Composite defense stocks. As the tension between the US and China in the South China Sea increases, they rise sharply. In the past few days, two US Navy aircraft carriers arrived in the area for the first time in six years.
This is not just an indication of Washington’s military power. This is a serious attempt to counter China’s land demands in most of the controversial region.
China also conducted naval exercises to draw criticism from the Pentagon and several South China Sea neighboring countries. Increased geopolitical risk has kept sovereign bond returns low, with a worldwide central bank incentive. The US’s 10-year return is 0.67% at the time of writing.
How will Bitcoin and Cryptocurrencies be Affected?
Covid-19 uncertainty, China’s financial strength and geopolitical risk shift the global balance of power to the Pacific. And with it, trillions of dollars of investment are shifting in the same way.
The European Union and America are facing a serious scenario that will continue on the way of printing money and larger debt rises. This will deepen the depreciation of currencies. We are now seeing this expansion with the Lebanese pound falling under a Satoshi.
Chinese investors remember what happened when their government took them to a stock market bubble. They will probably be more wasteful this time and will try to bull and protect their earnings before the party ends.
Only time will show this, but in both cases, let us remind you that the cryptocurrency is strong to use as a decentralized money, free from the access of central banks and governments.Bitcoin and other major cryptocurrencies, like decentralized finance and staking-oriented projects, are in a good position to attract a mass of wealth printed in the West and traded in the East.