China’s economy is facing deflation, which historically has been a precursor to recession. To combat this, the People’s Bank of China has been injecting liquidity into the market. Interestingly, this has had a positive impact on the price of Bitcoin, with a noticeable correlation between increased liquidity and Bitcoin’s price since September.

Deflation in China has occurred for the second consecutive month, with an inflation rate of -0.5% in November. This follows a pattern seen in previous recessions, such as in 2000 and 2008. The real estate issues in China are well-known, and the central bank’s efforts to counteract deflation are aimed at preventing a recession.

Since September, the price of Bitcoin has been influenced by the increased liquidity measures taken by the People’s Bank of China. This correlation suggests that Bitcoin may see potential gains from China’s monetary policy.