While 2021 saw a heavy sell-off from Asian markets towards cryptocurrencies, in the last days of the year, it seems that investors from China are slowly returning to buying Bitcoin and cryptocurrencies.
The days of last Monday and Tuesday saw a big movement by large Asian investors towards digital assets that pushed the market upwards and allowed Bitcoin’s prices to surpass $49,000 again.
According to experts, this could mean that the sell-off following the decision of Chinese authorities to ban cryptocurrencies would come to an end.
Hong Kong-based cryptocurrency lender Babel wrote in its latest weekly newsletter:
“After Huobi completed its final exit from China last week, selling pressure from Asia seems to be slowing down considerably.”
Bitcoin purchases in China
Bobby Lee, the founder of the BTC China exchange, said the Chinese don’t care about the political aspects of Bitcoin.
“What they care about is income: can Bitcoin make me money now?”
Now that China’s economic growth engine has slowed down, it’s likely that a conservative asset like Bitcoin could once again interest investors beyond the ban imposed by the authorities.
Many are using alternative solutions to buy cryptocurrency outside of traditional exchanges; numerous people in these months are using digital wallet solutions such as Metamask that is usually used to exchange NFT but can also be used to trade cryptocurrencies when needed.
As if to say that China’s ban on digital asset-related activities, as was the case in 2017, could ultimately result in much fewer adverse effects on cryptocurrencies than you might think.
Volatility in the markets
Certainly, we are seeing a lot of volatility in the Asian markets, also determined by exogenous situations such as the heavy crack of the real estate giant Evergrande, which led to a great nervousness in the Chinese markets.
“General confidence in cryptocurrencies is still high, and market sentiment is returning as we saw a general higher risk appetite on Monday. The effect of Omicron seems much milder than the market has digested.”
Edison Pun, the senior market analyst at Saxo Markets in Hong Kong, told Bloomberg.
More liquidity in the market
Another major factor that could affect the Chinese appetite to invest in Bitcoin in the coming year is the Central Bank’s decision to announce a cut in its prime rate on one-year loans, from 3.85 percent to 3.8 percent. That’s the first cut since May 2019.
Interest rate cuts tend to inject liquidity into the economy and consequently, as already seen in the USA, raise the level of inflation. Therefore, it is quite understandable that instruments such as pro-Bitcoin and Ethereum considered value reserves and anti-inflation instruments can react positively in the short and medium-term.
That’s why in the last few days, Samson Mow, CSO of BlockStream, a blockchain software company, has predicted that the quotations of Bitocin can reach 100,000 dollars in 2022, thanks to the return of Chinese investors.