China's Central Bank may introduce stimulus policies, global liquidity expectations are warming up, can altcoins welcome a historic big pump?

Faced with signals of a slowdown in China's economic activity (July retail sales fell by 0.1% month-on-month, fixed asset investment dropped by 5.3% year-on-year, and the unemployment rate rose to 5.2%), the market expects the People's Bank of China (PBOC) to introduce stimulus measures as early as September. Analysts point out that if the Central Bank of China releases liquidity, it could significantly boost global risk assets, especially providing substantial Favourable Information to liquidity-sensitive alts, potentially driving them to break historical highs. Research shows that the price of Bitcoin has a 94% high correlation with global liquidity. China accounts for 19.5% of global GDP and has an M0 monetary base of $5.2 trillion, making its policies critically influential on the crypto market. Coupled with the resilience of the U.S. stock market (S&P 500 hitting new highs) and a rebound in U.S. Treasury yields (improving risk appetite), alts may experience a perfect pump, but caution is needed regarding economic recession, geopolitical issues, and regulatory uncertainties.

China's economy under pressure as Central Bank's easing expectations rise

Latest economic data shows that China's growth momentum is weakening:

• Retail Sales: Decreased 0.1% month-on-month in July
• Fixed asset investment: Year-on-year plummet of 5.3%, the largest decline since March 2020.
• Industrial output: only a slight increase of 0.4%
• Unemployment Rate: The urban surveyed unemployment rate rose to 5.2% in July (from 5.0% in June) Goldman Sachs, Nomura, and Deutsche Bank economists unanimously expect that the People's Bank of China may "launch stimulus policies (such as interest rate cuts or providing special financing conditions) as early as September" to boost the economy by expanding the money supply. This move will lower financing costs and increase market Liquidity.

Global Liquidity: The Core Driving Force of the Crypto Market

The 21Shares report on March 21, 2025 reveals key patterns: the price of Bitcoin has a correlation of up to 94% with global liquidity, even surpassing the S&P 500 index and gold. This highlights the decisive impact of Central Bank policies on the crypto market. The M0 monetary base scale of the world's four major economies:

• United States: $5.8 trillion
• Eurozone: 5.4 trillion USD
• China: $5.2 trillion (accounting for 19.5% of global GDP)
• Japan: $4.4 trillion As the world's second-largest economy, China's Central Bank policy cannot be ignored for its potential impact on the flow of international capital and risk assets (including cryptocurrencies), even if the market's focus often centers on the Federal Reserve.

Liquidity Easing: A Catalyst for Altcoin Explosions?

Historical experience shows that Central Bank liquidity injections are usually favourable for risk assets:

1. Reduce financing costs: Stimulus policies make funds more accessible and encourage investment.
2. Increase risk appetite: Investors are more inclined to chase high-yield assets.
3. Crypto Market Transmission: In a liquidity easing environment, the demand for high beta alts often surges, as they are particularly sensitive to changes in global liquidity. The current market environment provides fertile ground for altcoin rebounds:

• Resilience in U.S. stocks: The S&P 500 index closed above 6400 points for the first time.
• US Treasury yields rise: The 5-year US Treasury yield increased from 3.74% on August 4 to 3.83%, indicating a cooling of risk aversion sentiment. If the Central Bank of China does indeed implement a loose monetary policy, it may trigger a large-scale rotation of funds into the crypto market, driving a widespread rise in alts.

Chinese Elements: Historical Genes and Current Reality

China has played a key role in the crypto market:

• Historical Status: Before the regulatory crackdown in 2017, China was one of the largest crypto market and altcoin markets in the world, with a strong grassroots and institutional foundation. Altcoins with a Chinese background such as NEO (Antshares) and VeChain were highly favored by local investors.
• Current Situation: Despite policy restrictions, the cryptocurrency holding rate among Chinese citizens has dropped to about 5.2% (retail participation has decreased), but blockchain projects and alts in China still have strong corporate and technical support. China's stimulus policies may indirectly activate this portion of "idle capital."

Risks and Uncertainties: Warnings Before the Frenzy

Despite the optimistic liquidity outlook, potential risks still need to be vigilant:

1. Policy effectiveness is in doubt: If China's stimulus measures are insufficient or seen as short-term actions, their uplifting effect on alts may be limited.
2. Global Economic Recession: Concerns over economic slowdowns in multiple countries may suppress overall risk appetite.
3. Geopolitical tensions: International relations friction (such as the focus on the Trump administration's decision to delay tariffs on China for 90 days) creates uncertainty.
4. Regulatory Evolution: The cryptocurrency regulatory framework in various countries around the world (especially the United States) is still evolving and may affect market sentiment.
5. U.S. Economic Signals: The rebound in U.S. Treasury yields indicates an improvement in risk appetite, but it also reflects the market's pricing of inflation and growth, with a complex interaction with Chinese policies.

Conclusion

The potential easing policy of the Central Bank of China is igniting a spark of hope in the altcoin market. Historical data reveals that 94% of global liquidity drives Bitcoin prices, and when combined with China's $5.2 trillion monetary base, any easing could become the catalyst for a historic altcoin rally. The unique project genes of the Chinese market (such as NEO, VET) and the potential return of offshore funds may further amplify the effect. However, the expectation of a frenzy must coexist with risk awareness—global economic clouds, geopolitical games, and regulatory uncertainties still hang over the market like the sword of Damocles. Investors should closely monitor the timing and strength of Chinese policy implementation, U.S. economic data, and regulatory dynamics when positioning in altcoins, seeking a balance between the potential feast driven by liquidity and multiple uncertainties.