Bitcoin spiked above the $97,000 mark on Wednesday before retreating slightly to the $96,000 range, driven by renewed optimism around global liquidity following China’s massive financial stimulus package and speculation about potential changes in U.S. monetary policy. The digital asset’s surge mirrored broader market enthusiasm as investors digested significant macroeconomic developments on both sides of the globe.
The uptick came as Beijing announced a $138 billion stimulus initiative to revive its slowing economy, a move that coincided with fresh discussions between Chinese and American officials over trade relations.
China Injects Liquidity Into the Economy
The People’s Bank of China (PBOC) launched a wide-ranging economic support package aimed at unlocking long-term capital and encouraging consumption. A key part of the initiative included slashing the reserve requirement ratio for banks by 0.5 percentage points, effectively freeing up around 1 trillion yuan ($138 billion) to be injected into the financial system.
In tandem with the RRR cut, China’s central bank also trimmed key interest rates—lowering the primary policy rate by 10 basis points and cutting the seven-day reverse repo rate from 1.5% to 1.4%. Additional efforts to stimulate domestic spending included a 500-billion-yuan refinancing program focused on elderly care and consumer support, alongside new measures to reduce mortgage and auto loan costs.
This aggressive round of economic support arrives as China grapples with weak consumer activity, a troubled property market, and growing concerns over slowing growth. Its release was strategically timed ahead of planned diplomatic talks with Washington.
U.S.-China Trade Dialogue Boosts Sentiment
Just hours before China’s policy adjustments, U.S. Treasury Secretary Scott Bessent announced plans to meet with Chinese Vice Premier He Lifeng in Switzerland over the weekend for formal trade negotiations—the first since steep tariffs were implemented during the Trump administration.
Bessent emphasized a willingness to resolve ongoing tensions, saying, “Thanks to the president, global partners have been engaging more with the U.S. China has been the missing piece. We’ll be sitting down this weekend to explore mutual interests. The current tariff regime is unsustainable, but we’re not pushing for separation—we’re aiming for balanced, fair trade.”
This diplomatic breakthrough further lifted investor confidence, reinforcing the market’s positive response to China’s monetary easing.
Crypto and Equities Rally on Macro News
The dual headlines—Beijing’s stimulus and revived U.S.-China trade talks—triggered an immediate rally across financial markets. The S&P 500 futures index jumped over 1%, and Bitcoin surged past $97,000, reflecting the renewed appetite for risk assets. Although Bitcoin later pulled back to $96,497, it remained up over 2% in 24 hours.
Analysts view this price action as another example of how Bitcoin responds directly to liquidity shifts and central bank signals, often moving ahead of traditional asset classes.
Fed’s Silent Bond Buying Sparks QE Speculation
Adding to the uncertainty, the U.S. Federal Reserve made unexpected bond purchases totaling nearly $35 billion over two days. On May 5, the Fed acquired $20 billion in three-year Treasury notes, followed by $14.8 billion in 10-year bonds the next day—both without any accompanying public statements.
These discreet purchases have led many to believe the Fed may be testing the waters for another round of quantitative easing (QE) or, at the very least, providing a stealth form of liquidity to calm markets. Investors and economists are now waiting for clues from the upcoming Federal Open Market Committee (FOMC) meeting regarding interest rates and broader monetary strategy.
Arthur Hayes Predicts Bitcoin Will Soar
Arthur Hayes, co-founder and former CEO of BitMEX, weighed in on the Fed’s latest moves, arguing that such quiet liquidity injections could set the stage for a massive crypto bull run. In a recent article, Hayes claimed that if the Fed fully returns to QE, Bitcoin could skyrocket to $250,000 by the end of 2025.
“The Federal Reserve’s recent actions suggest we’re already in the early stages of monetary easing,” Hayes noted. “Bitcoin performs best when central banks flood the markets with liquidity. If this trend continues, digital assets will likely outperform other financial instruments.”
Hayes also pointed to rising institutional demand for crypto, now bolstered by the introduction of Bitcoin ETFs and clearer regulatory structures, but maintained that central bank policy remains the dominant driver of price action in the near term.
Bitcoin as a Liquidity Barometer
Bitcoin’s latest price movements underscore its growing role as a real-time gauge of global liquidity and investor sentiment. As governments and central banks respond to economic challenges, from weak demand in China to inflationary pressures in the U.S., Bitcoin appears increasingly tethered to macroeconomic shifts rather than just crypto-native developments.
The asset’s rapid climb and retracement highlight how sensitive it remains to policy changes and market signals, positioning it as a bellwether for broader financial trends.
What Lies Ahead?
With multiple moving parts in play—the size and scope of China’s stimulus, progress in U.S.-China trade discussions, and possible shifts in the Federal Reserve’s monetary stance—Bitcoin’s path remains highly reactive to developments across global markets.
Investors are now closely watching for statements from the FOMC meeting that might clarify whether the Fed is preparing for a full-scale easing cycle or merely fine-tuning its existing approach. Meanwhile, optimism continues to grow that renewed cooperation between the world’s two largest economies could ease inflationary pressures and re-stabilize trade flows.
For Bitcoin, the current environment suggests continued volatility but also opens the door to significant upside—especially if central banks worldwide keep leaning toward growth-focused monetary policies.
