Bitcoin Surges 25%: China’s Credit Impulse Hits Lowest Level Since 2008—Is the Rally Continuing?
As the indicator measuring new credit flow in China dropped to 20.84 points, its lowest level since 2008, Bitcoin surged 25% in August.
Data reported by CoinDesk shows a notable divergence between China’s credit impulse and Bitcoin’s recent rally. While the weakening of new borrowing rates relative to the economy warns of cooling global risk appetite, the Bitcoin rally was accompanied by strong inflows into U.S. spot ETFs, the closing of short positions, and gains in other assets.
Credit impulse measures whether new borrowing in an economy is accelerating relative to the total economic size. When the indicator rises, spending and growth are supported; a decline indicates a slowdown in credit creation. According to Societe Generale research, this movement is linked to the global manufacturing cycle and can lead S&P 500 returns by approximately 12 months.
China’s credit impulse at historic lows
According to MacroMicro data, the raw value of the Bloomberg China Credit Impulse Index recently fell to 20.84 points. This marks the lowest level the indicator has seen since 2008. Societe Generale strategist Albert Edwards remarked that ignoring the monetary tightening in China could be one of the biggest mistakes for investors this decade.
Despite this, Bitcoin rose 25% in August, climbing above $80,000. The rally was supported by spot ETF inflows as well as short covering. However, the surge stalled just below $80,000 as renewed concerns that the Fed might hike interest rates weighed on market sentiment.
Two distinct scenarios emerge for Bitcoin
In the first scenario, Bitcoin could continue its ascent despite the macro warning originating from China. The growing dominance of U.S.-based institutional flows in the crypto market may make Bitcoin less sensitive to credit conditions in China compared to the past.
In the second scenario, a potential sell-off on Wall Street could carry risk aversion over to Bitcoin. In this case, pressure on Bitcoin could increase regardless of where the buyers are located.