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By Omkar Godbole (All times ET unless indicated otherwise)
Keeping an eye on the Far East has been our mantra lately, and the latest news from the Chinese bond market shows why. Just today, China’s one-year government bond yield dropped below 1% for the first time since the Great Financial Crisis, adding to the year-to-date downturn. The benchmark 10-year yield slipped to 1.7%.
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How does that play out for risk assets like bitcoin, which slumped overnight? Well, there are two key reasons to feel optimistic. For a start, the continued decline in yields suggests Beijing will have to roll out more aggressive stimulus measures than we saw earlier this year.
Jeroen Blokland, the founder and manager of the Blokland Smart Multi-Asset Fund, put it succinctly: “This indicates that China’s economic troubles are far from over, and the government will do what aging economies often do: ramp up government spending, allow for larger deficits and higher debt levels, and drive interest rates down toward zero.”
And there’s more to consider. This situation in China also raises questions about Fed Chairman Jerome Powell’s recent alarm over interest rates, which sent bitcoin tumbling to $95,000 from $105,000.
China, the world’s factory, is facing worsening deflation having already experienced the longest stretch of falling prices since the late 1990s. That could cap PPI and CPI readings worldwide, including in the U.S., a major trading partner.
BNP Paribas noted this phenomenon earlier this year, with analysts saying that China has already contributed to lowering core inflation in the eurozone and the U.S. by about 0.1 percentage point and core goods inflation by roughly 0.5 percentage point.
What this means is that Powell’s concerns about stubborn inflation may be unfounded and begs the question whether he will really stick to just two rate cuts for 2025 as he implied on Wednesday? Many experts think there might be more.
“Fed concerns on inflation are misguided. Interest rates are still too high in the U.S., and liquidity is about to increase, driving Bitcoin higher,” said Dan Tapiero, CEO and CIO of 10T Holdings, on X, alluding to China’s declining bond yields.
For now, markets aren’t considering this bullish angle. BTC has dropped below $95,000 and ETH has slipped to $3,200. All the 100 biggest coins are flashing red. Futures tied to the S&P 500 are down 0.5%, indicating a negative open and continuation of the post-Fed risk-off.
Sentiment may worsen if the core PCE, the Fed’s preferred inflation gauge, comes in hotter than expected later today. That might see markets price out another rate cut, leaving just one on the table for 2025. Stay alert!
Token Events
- Token Launches
- Binance Alpha announced the fourth batch of tokens, including BANANA, KOGE, BOB, MGP, PSTAKE, GNON, Shoggoth, LUCE and ODOS. Binance Alpha is the pre-selected pool for Binance listings.
Token Talk
FART’s rise is as much about human psychology as economics. In a market where fundamental investments are faltering, it has become a symbol of the absurd, a light-hearted rebellion against the grim financial forecasts.
Its platform allows users to potentially submit related-theme memes or jokes to earn tokens. It features a unique transactional system where each trade produces a digital flatuence sound.
People are investing not for the promise of utility or groundbreaking technology but for the joy of the moment, the shared giggle over a coin whose name alone is enough to break the tension of the day.
It isn’t all about the jokes, though. The token is part of the rising AI agent crypto sector, one that claims to use AI-powered entities to perform tasks on blockchain networks autonomously under a meme coin branding.