Hong Kong has the Potential to Trigger New Bitcoin Bull Market
Providers (VASP) license in order to legally operate in the Chinese special economic zone.
The Hong Kong Securities and Futures Commission issued a statement yesterday outlining its plan to allow both institutional and retail investors to trade cryptocurrencies such as Bitcoin and Ethereum. “As long as you don’t violate the basic rule of not jeopardizing China’s financial stability,” Nick Chan, a member of the National People’s Congress and digital asset lawyer, told Bloomberg. The reopening of Hong Kong means massive new inflows of funds for the Bitcoin and crypto markets. Hong Kong is the world’s fourth largest financial center, after New York, London, and Singapore, and it is one of the world’s largest capital hubs.
Furthermore, the special economic zone is regarded as the first choice for wealthy mainland Chinese to withdraw capital from the isolated country. Estimates place the total amount of capital moved by mainland Chinese in the special economic zone at around $500 billion in order to gain access to the global financial system. Despite the fact that Hong Kong will not allow truly decentralized crypto applications or self-storage, the infusion of new capital could be very beneficial to Bitcoin and crypto markets.
After all, it wasn’t long ago that China accounted for the majority of the crypto trading volume.
The plan for Hong Kong to become a crypto hub coincides with China reopening after Covid-19. China’s central bank made the largest liquidity injection in its history last Friday to help pull the country’s economy out of its historic slowdown, as “tedtalksmacro” discussed in a Twitter thread:
This has implications for Bitcoin and cryptocurrency. According to the macro analyst, the People’s Bank of China (PBoC) is the world’s third-largest central bank, with approximately $6 trillion in assets and a key role in global liquidity. “While most analysts are focused on how the Fed’s tightening will reprice risk assets this cycle, they are overlooking the scale of easing in the east,” the analyst claims.
Japan has the fourth-largest central bank in the world. Together, the two countries provide significantly more liquidity to global markets than the Fed’s tightening measures.
As a result, there is currently an increase in global liquidity.
Economists anticipate that the PBoC will play
a role in stimulating the Chinese economy by lowering interest rates in the coming months to support and encourage a sustained economic recovery. The establishment of Hong Kong as a crypto hub, combined with Chinese monetary policy, could thus catalyze a new Bitcoin bull market. BTC was trading at ,004 at the time of writing, attempting to break through key resistance at ,244.