During Shanghai trading hours, Bitcoin dipped below $42,000 for a brief period, as Chinese markets had a day of losses.
At one time, the Shanghai Composite Index sank by more than 2%, while the Shenzhen Component Index plunged by more than 3%, and the ChiNext Index fell by over 4%.
One of the reasons for the drop could be a higher-than-expected rise in producer inflation in March, which rose 8.3 percent year over year, exceeding estimates of 7.9 percent.
Consumer inflation, on the other hand, is relatively low at 1.5 percent, but it is above predictions of 1.2 percent.
This large gap between consumer and producer inflation suggests that either consumer inflation is on the way to China, or that producers are sucking up costs, reducing margins.
“I think the more significant aspect is the large disparity between CPI and PPI,” said Ramiz Chelat, portfolio manager at Vontobel Asset Management, “which implies that pricing power amongst most companies in China is weak and they’re taking a knock on margins.”
The reintroduction of lockdowns in the world’s second largest economy is dampening sentiment, even as China is chastised for its ostensibly unattainable zero-covid policy.
Then there’s the property market’s ongoing unwinding, with real estate stocks taking the worst hit.
Furthermore, US Treasury yields continue to rise, indicating a flight to safety, with China reporting the largest reduction in foreign investors withdrawing from its bond market since 2015.
Bitcoin, on the other hand, was surging in the United States on Sunday afternoon, reaching $43,400. Its biggest drop occurred at 10 p.m. euro time, when futures opened, when it fell to $42,000 and stayed there during Shanghai trading.
It is gaining somewhat this morning in Europe, indicating that China may not be having much of an impact on BTC.
What will happen to US stocks remains to be seen, but they sometimes have an adverse correlation with Shanghai.
Despite the fact that US futures are now in the red, this might change on opening day, as Brent oil is about to fall below $100.
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