Bitcoin maintained its position above $30,000 on Monday as China’s producer price index (PPI) data suggested that the global liquidity-tightening cycle, which has disrupted risk assets including cryptocurrencies, may be approaching its end. The National Bureau of Statistics (NBS) reported that China’s PPI, a measure of factory-gate prices, fell 5.4% year-on-year in June, marking the ninth consecutive monthly decline and the sharpest drop in seven years.
This downward trend in China’s PPI is expected to lead to lower export prices and deflationary pressures in the global economy. As China is a major trading partner for prominent economies worldwide, persistent deflation in one of the largest sources of manufactured products could provide relief to western central banks. These banks have been grappling with rising inflation levels, prompting aggressive interest-rate increases to control inflationary pressures that have been detrimental to the broader economy.
The Federal Reserve (Fed) has raised rates by more than 500 basis points to the range of 5% to 5.25% since March 2022, and earlier this year, it faced a banking crisis. In Europe, Credit Suisse required a rescue from Swiss rival UBS.
According to David Brickell, director of institutional sales at crypto liquidity network Paradigm, China’s exportation of disinflation is impacting the western world. While producer price inputs have reflected this trend, consumer prices have not fully experienced the effects yet. Ultimately, the end of the global hiking cycle, driven by deflationary pressures, is expected to be positive for risk assets.
In the United States, May’s annual increase in producer prices was the smallest in nearly two and a half years, and the consumer price index (CPI) rose by 4%, the lowest in two years. Data anticipated for release on Wednesday is projected to show a further slowdown in the CPI growth rate, with expectations of 3.1% in June, as per Refinitiv data cited by CNN.
The interplay between China’s PPI data and global inflation dynamics will be closely monitored by market participants, including cryptocurrency investors, as they assess the potential impact on risk assets like Bitcoin. The overall sentiment suggests that the tightening cycle may be nearing its end, which could bring relief to the broader economy and positively impact investment landscapes.
