Let me first talk briefly about the domestic situation. I found that many media have been talking about A-shares and houses in the past two days, because a series of favorable policies were introduced yesterday (September 24), including lowering the reserve requirement ratio, lowering interest rates, reducing the interest rates of existing mortgage loans, stock repurchases, increasing holdings and re-lending, etc. It seems that many people see hope again?
And I also found something interesting. In the past few days, some foreign KOLs on Twitter have regarded these economic benefits in China as an important catalyst for the growth of the crypto market. So, can the central bank’s big move really be regarded as an important catalyst for the crypto market?
Let's first take a look at the benefits of this announcement in an easy-to-understand way:
The first positive is the reduction of the deposit reserve ratio by 0.5 percentage points, and there may be another reduction of 0.25-0.5 percentage points before the end of the year.
What is the deposit reserve ratio? Let's take a small example to make it clear. Suppose you deposit 100 yuan in a bank. The bank may only need to keep 20 yuan to meet your possible withdrawal needs, and the other 80 yuan can be directly loaned out by the bank. In this case, the deposit reserve ratio here is 20%.
The so-called reduction of the deposit reserve ratio is equivalent to increasing the total supply of money to the market without printing money. According to some official media, if it is reduced by 0.5%, it is equivalent to adding 1 trillion yuan of liquidity to the market. As shown in the figure below.
Of course, this so-called 1 trillion yuan of funds does not mean that it can flow into the stock market or real estate all at once. As for how much can flow in, I can’t say, but it is indeed a good thing for A-shares.
The second benefit is the reduction in interest rates on existing mortgage loans, and the uniform down payment ratio for home purchases is adjusted to 15%.
The so-called reduction in the interest rate of existing mortgage loans refers to the reduction of the mortgage interest rate for users who have already bought a house. To put it bluntly, the monthly payment for house slaves can be reduced. According to official media, the average reduction in the interest rate of existing mortgage loans is expected to be 0.5%, which is expected to benefit 50 million households and reduce household interest expenses by about 150 billion yuan per year on average.
Then, for new homes, the national level will no longer distinguish between first and second homes, and the unified minimum down payment ratio for home purchases will be 15% in the future. However, local governments can formulate policies based on this, that is, if cities such as Beijing insist on implementing 25%, it is also acceptable.
Let's continue to talk about the interest rate of existing mortgages. If we simply reverse the data released by the official media, lowering the interest rate of existing mortgages will benefit 50 million households, which is 150 million people if each household has 3 people (a family of three). We currently have a population of 1.41 billion, which means that the population with mortgages accounts for about 100 million (excluding children).
I checked the current income level in our country and the data showed that in the first half of this year, the per capita disposable income of residents nationwide was 20,733 yuan, as shown in the figure below.
But I feel that this kind of average data is useless. Many things lose some reference significance once they are averaged. So I searched for other data, but I didn’t find the latest one. I only found a set of old data: In 2022, the total number of people in China with a monthly income of less than 5,000 yuan was 1.328 billion. As shown in the figure below.
Let's use 1.3 billion as an example. On the other hand, it means that there are 100 million people with a monthly income of more than 5,000 yuan, and there are about 100 million people with mortgages. Therefore, from a macro perspective, it seems that most people who have the ability to buy a house in recent years have already bought a house and taken out a mortgage. This may not have been a problem in previous years, but now we are in the economic downturn, and the pressure of repaying loans is getting greater and greater for many people. Reducing the interest rate on existing mortgages is just a way to slow down the situation and let people pay less money every month.
I see many people saying that this round of favorable policies will be conducive to the rise in housing prices. I think this statement is a bit too optimistic... The prerequisite for housing prices to continue to rise is that there must be a large number of people to take over. How many people are currently able and willing to take over?
In addition to the above two benefits, some other policies were also announced at the press conference yesterday (September 24), including a 500 billion swap fund for securities companies/fund companies/insurance companies (good for A shares), a 300 billion loan for major shareholders of listed companies (the loan interest rate is only 2.25%, which is also good for A shares), and medium-sized enterprises can also enjoy the loan policy for small and micro enterprises for three years, etc. Due to space constraints, we will not discuss it here, and those who are interested can search and learn more by themselves.
Next, let’s return to the encryption market:
We also mentioned at the beginning of the article that in the past few days, some foreign KOLs have regarded these economic benefits in China as an important catalyst for the growth of the crypto market on Twitter. I feel that these foreigners still overestimate this matter.
First , lowering the deposit reserve ratio means that there will be more liquidity in the domestic market, but how many loans can ordinary people get? How many loans do companies dare to participate in the crypto market? These are all unknowns.
Secondly , lowering the interest rates on existing mortgages can indeed allow all mortgage holders to pay hundreds to thousands of yuan less (or more) each month, but whether this money will be used for food or cryptocurrency speculation is still unknown. Of course, it is not ruled out that some people will continue to participate in the crypto market with the mentality of getting rich overnight.
So overall, we don’t think that the so-called liquidity benefits mentioned above will have much effect on the crypto market. Unless we (mainland China) have a clear policy change to support the crypto market, it will not have a fundamental impact on the crypto market. However, such a policy is impossible in our opinion, at least not in the short term. Of course, it is also undeniable that many people here (mainland China) are also exposed to crypto assets in a non-public way. By 2024, the number of users participating in crypto assets worldwide is expected to be 560 million, of which the number of crypto users in Asia is about 330 million. There is no accurate statistical data on the number of crypto users in China. I estimate that there should be at least 50-80 million users (just a guess).
As far as the crypto market is concerned, the focus we need to pay attention to at present are still the factors mentioned in Huali Huawai’s previous articles, such as the US election (two days ago, I also saw a report saying that Harris stated for the first time that if elected president, she would encourage the development of the cryptocurrency industry), the Federal Reserve’s continued interest rate cuts, the US dollar index (including the Japanese yen index), etc.
In addition, you can also refer to some on-chain indicators. In addition to some influencing factors and indicators that we have sorted out in previous articles, there are actually many indicators that can also be used to assist in judging the market. In this issue, we will continue to list several auxiliary reference indicators:
The first indicator is Funding Rates
Funding Rates is a concept we have already introduced in detail in previous articles. To put it simply: a positive funding rate indicates that the perpetual contract is trading at a higher price than the spot price and requires traders holding long positions to pay fees to traders holding short positions, which is a cost they may be willing to bear. A negative funding rate is the opposite.
Judging from the current funding rate, there was a small downward trend from the high point a few days ago, but it has now returned to a relatively high point. On the surface, it seems that the main force is still bullish, as shown in the figure below.
In the short term, if you find that bulls are starting to exit, you can consider reducing your positions.
The second indicator is Coinbase Premium Index
Coinbase Premium Index refers to the percentage difference between the Coinbase Pro price (USD pair) and the Binance price (USDT pair), which can be used as an indicator of US investor demand. An increase in the index generally indicates an increase in buying power in the US market, while a negative value may indicate an increase in selling pressure. As shown in the figure below.
Judging from the current premium index, although the Federal Reserve announced a rate cut on September 18, the premium index only turned from negative to positive and did not break through the previous high.
The third indicator is the Taker Buy Sell Ratio
Taker Buy Sell Ratio is the buy-sell ratio within an exchange, a key indicator used to measure market sentiment and potential price movements. A ratio above 1 indicates that there are more buyers than sellers, representing bullish sentiment, while a ratio below 1 indicates the opposite. See the figure below.
Judging from the current buy-sell ratio, the ratio has risen from 0.97 on September 23 to 1.03 today, indicating that short-term buying power is getting stronger, but compared with several high points, there is a trend of gradual decline.
The fourth indicator is Short Term Holder (STH)
STH realized price is an indicator that calculates the average price of Bitcoin purchased by short-term investors (i.e. investors who hold the currency for less than 155 days). This indicator is usually also used as a key support and resistance level for Bitcoin. If the daily closing price of Bitcoin is above this indicator level, it means that the market is optimistic in the short term. As shown in the figure below.
The fifth indicator is Exchange Inflow CDD
CDD stands for Coin Days Destroyed, which is the number of days between creation and spending multiplied by the total number of UTXOs (CDD provides the sentiment and behavior of long-term holders, and a high value indicates that long-term holders have transferred their tokens for possible sales). When combined with Exchange Inflow, it means that these tokens are the total amount flowing into centralized exchanges. As shown in the figure below.
Judging from the current data, short-term selling seems to be showing signs of intensifying, and the market trend in the next few days is expected to remain volatile.
The sixth indicator is ETF Flow
The inflow/outflow of funds in the Bitcoin spot ETF is also one of the short-term indicators we have focused on before. In theory, the funds of ETFs should continue to increase after the Fed cuts interest rates, but the actual situation is that although the ETF funds are still in a net inflow state after the interest rate cut, the inflow trend has obviously decreased in recent days. In other words, the liquidity of ETFs has not yet undergone a significant trend line change. As shown in the figure below.
Above we have only listed 6 commonly used short-term indicators. In fact, there are many such indicators. We will continue to sort them out for you when we have the opportunity. Interested friends can also use some on-chain tools to do further exploration and research on their own.
In general, although the market has improved in recent days, and it seems that many MemeCoins have started to create FOMO sentiment, the risks are still there. Overall, the market has not yet completely reversed and is still in a volatile market. The rise in the past few days is probably just a staged rebound. But if Bitcoin can stabilize at around $64,000, then the short-term market in the future (October) is still worth looking forward to. As for the so-called bull market that everyone is looking forward to, wait until Bitcoin breaks through the previous high before considering it!
We will share the content of this issue here. More articles can be viewed on the homepage of Huali Huawai. The above content is only a personal point of view and analysis, which is only used for learning records and communication, and does not constitute any investment advice.
