China’s Fiscal Package Could Send Bitcoin Soaring: Why

As the US presidential race heats up, a possible victory for former President Donald Trump could trigger a major economic crisis, especially in China.

In anticipation, Beijing's National People's Congress (NPC) Standing Committee is set to discuss the historic 10 trillion yuan (about $1.5 trillion) fiscal package from Nov. 4 to Nov. 8.

China is set to discuss another round of fiscal aid next week.

Citing sources close to the matter, Reuters reported that China's NPC Standing Committee is debating raising more than 10 trillion yuan through special treasury and local government bonds. The package is expected to allocate 6 trillion yuan to local government debt relief and 4 trillion yuan to buy vacant land and property.

“The China NPC Standing Committee meeting is scheduled for November 4 to November 8,” said CN Wire, which reports local Chinese news.

The talks began a day before the US election and will conclude after the 47th president is named. This proposed stimulus package is aimed at injecting much-needed liquidity into the economy. General opinion suggests that the NPC's proposed measures could be accelerated if Donald Trump wins, adding fiscal certainty to already fragile US-China relations.

Read more: How to protect yourself from inflation using cryptocurrency

Notably, this package follows earlier reports of China's $142 billion budget bailout. According to BeinCrypto, some analysts speculated that the first aid could spark a Bitcoin bull run. Observers believe that the now expanded $1.5 trillion effort could amplify this effect.

This economic stimulus could shift money flows away from traditional markets and into cryptocurrencies, potentially accelerating Bitcoin's upward movement.

Crypto Analysts take on how this liquidity will affect the price of Bitcoin

The cryptocurrency sector has responded positively to China's proposed stimulus measures. “Money printing is about to go parabolic,” crypto analyst Kyle Chase, known for his market insights, tweeted. This post captures the feeling that this increase in liquidity could drive up Bitcoin prices.

Based on social media reactions, the general perception is that a Trump win combined with China's extensive fiscal stimulus could prompt investors to seek shelter in alternative assets such as Bitcoin. This is especially true of weakening confidence in international currencies.

BitMEX co-founder Arthur Hayes echoes this bullish view. In his recent blog post, Hayes argued that China's anticipated quantitative easing (QE) would cause a significant increase in Bitcoin. Hayes is particularly optimistic about Bitcoin's performance as money supplies increase. He pointed out that few assets outperform Bitcoin during a currency crash.

“Until fiat is created, bitcoin will rise,” he said in a blog post, adding that “no other asset class is more volatile than Bitcoin.”

Arthur Hayes expects investors to perceive Bitcoin as a hedge, shifting capital into the digital asset to protect purchasing power. BTC, now at an all-time high of $73,777, has outperformed traditional assets such as gold, the S&P 500 and real estate. This shows the appeal of an inflation-resistant investment.

China's increased liquidity may make bitcoin, in particular, investors wary of a depreciating fiat currency. Known as “safe haven demand,” this trend sees investors turning to options that hedge against inflation. Demand for assets that denominate the yuan or dollar — such as Bitcoin — could increase due to liquidity in the Chinese economy.

The NPC's fiscal package discussions coincide with the US election, which could further boost Bitcoin's appeal. However, Beijing's position on Bitcoin remains cautious. China banned direct yuan-to-Bitcoin exchanges in 2017, although local merchants have since adopted peer-to-peer (P2P) solutions for yuan-to-Bitcoin conversions.

Platforms like Binance and OKX support these P2P exchanges, bypassing traditional trading pairs and providing an intuitive way for Bitcoin transactions. Dubbed “Sino-LocalBitcoins” by Arthur Hayes, this solution highlights the adaptability of Chinese traders and their enduring interest in cryptocurrency.

Analysts believe that China's underground bitcoin market may develop due to economic instability, especially China's quantitative easing (QE). Hayes notes that Beijing's ban on Hong Kong-based bitcoin ETFs reflects its cautious approach to curbing capital flows and regulating financial markets.

Read More: Why Hong Kong Spot Crypto ETFs Matter?

For now, the crypto community is watching closely to see if Bitcoin could enter another bull run, fueled by the US election results and a major Chinese liquidity injection.