Bitcoin steady as China rate cut fails to lift risk taking

Bitcoin traded near $26,819 after failing to stay above $27,150

Bitcoin traded almost flat on Tuesday as China’s first cut in benchmark lending rates in 10 months failed to boost the sentiment in traditional markets.

The People’s Bank of China (PBOC) reduced the one-year and five-year loan prime rates by 10 basis points to 3.55 per cent and 4.3 per cent, respectively. The one-year rate is a medium-term lending facility for corporate and household loans and the five-year figure is the reference rate for mortgages. During the past week, China’s biggest state banks cut rates on demand deposits by 5 basis points and 15 basis points on three- and 5-year time deposits.

The loosened conditions contrast with continued monetary tightening in western economies and follow recent economic reports that showed China’s economy is cooling down and is on the edge of deflation.

Bitcoin, a pure play on liquidity, battled to rise. The biggest cryptocurrency traded near $26,819 at 07:27 UTC after failing to stay above $27,150 during Asian trading hours, as per CoinDesk data.

The Australian dollar, which is sensitive to the Chinese economy because of the strength of trade ties between the two countries, dropped 0.7 per cent against the U.S. dollar, and China’s benchmark equity index, CSI, traded flat to negative. MSCI’s broadest index of Asia-Pacific shares outside Japan dropped over 0.5 per cent and S&P 500 futures was down 0.3 per cent.

The risk-off action indicates investors are not sure the rate cuts will be enough to boost the slowing economy and are looking for a larger stimulus package.

That could be the market’s way of saying that the rate cuts are telling of more problems than it being a solution to China’s recent economic problems, ForexLive’s analyst Justin Low stated in a market update.