Bitcoin dipped below $42,000 for a brief period during Shanghai trading hours, as Chinese markets had a day of losses.
At one stage, the Shanghai Composite Index sank by 2%, while the Shenzhen Component Index plunged by roughly 3%. The ChiNext Index fell by over 4%.
Producer vs Consumer Inflation
One of the reasons for the drop could be a higher-than-expected rise in producer inflation. In March it rose 8.3% yearly, exceeding estimates of 7.9%. On the other hand, consumer inflation is relatively low at 1.5%, but it is above predictions of 1.2%. This large gap between consumer and producer inflation suggests one of two scenarios. Either consumer inflation is on the way to China, or that producers are gobbling up costs, reducing margins. On Monday, Ramiz Chelat, portfolio manager at Vontobel Asset Management said: “I think the more notable fact is the big gap between CPI and PPI, and that indicates that pricing power amongst most companies in China is weak and they’re taking a hit on margins.”
The reintroduction of lockdowns in the world’s second-largest economy is dampening sentiment. Even as China is chastised for its seemingly unattainable zero-covid policy. Then there’s the property market’s continuous unraveling, with real estate stocks taking the worst hit. Furthermore, US treasury yields continue to rise, indicating a flight to safety. With China seeing the largest drop in foreign investors withdrawing from their bond market since 2015.
BTC Takes a Short Dip
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. It tumbled to $42,000 and remained there throughout Shanghai trading. It is rising slightly again this European morning, indicating that China may not be having much of an impact on BTC.
What US stocks will do remains to be seen, but they sometimes have an inverse correlation with Shanghai. Despite the fact that US futures are currently in the red, this could change at the open, with Brent oil poised to plunge below $100.