Why Arthur Hayes Believes China's Rate Cuts Could Trigger a Bitcoin Surge

At its fourth quarter meeting on December 27, the People’s Bank of China (PBOC) proposed a more dovish (low interest rate) policy going forward. This comes as the US Federal Reserve has different plans.

China Announces Interest Rate Cut

Financial analysts expect the PBOC to adjust the target funds rate to better align credit demand with monetary policy, as reported by Reuters. Consequently, crypto analysts foresee a significant monetary boost for Bitcoin prices fueled by China’s yuan printing.

The central bank announced a cut to banks’ reserve requirement ratios and interest rates at “a proper time.” They are likely to reduce China’s interest rates from the current target of 1.5% in 2025.

The last rate cut occurred in September when the rate dropped from 1.7% to 1.5%, coinciding with the Federal Reserve's pivot to a rate-cutting regime. Additionally, China’s 10-year and 30-year treasury yields hit record lows on Friday due to expectations of fresh monetary easing.

Arthur Hayes Predicts ‘Glorious’ Bitcoin Rally

The impending interest rate cut from the PBOC is expected to counter a deflationary yuan that risks leading to crippling loan revaluation. This will also increase the prices of various financial goods, particularly stocks and cryptocurrencies.

Arthur Hayes, co-founder of BitMEX, predicts that the next rate cut in Beijing, combined with the Fed’s low rate regime, will spark a “glorious” rally for Bitcoin and other crypto assets in 2025.

Hayes, an influential macro strategic analyst, notes that immediately after the US Federal Open Market Committee (FOMC) announced a rate cut in September, Bitcoin’s price rocketed above $60,000, eventually reaching record highs of $100,000.

In a previous Medium post, Hayes stated that when China unveils its monetary “bazooka,” purchasing a Wall Street Bitcoin ETF will be a no-brainer for regulated investors in the US. He emphasized that Bitcoin is the top-performing asset amidst global fiat debasement, attracting institutional investors.

In addition to a rising Coinbase premium index, ETF flows for Bitcoin are strong indicators that mainstream investors are returning to Bitcoin this January.