China's "credit impulse" — a measure of how fast new credit is growing relative to GDP — is flashing red, according to a CoinDesk report cited by ChainCatcher. Bloomberg's China credit impulse index recently printed at 20.84, its lowest level since 2008.
The indicator was devised by economist Michael Biggs in 2008. It is considered correlated with the global manufacturing cycle and leads S&P 500 returns by roughly 12 months.
Albert Edwards, a strategist at Societe Generale, warned that ignoring China's recent monetary tightening could become the "biggest investment mistake of the decade."
Despite the weak signal, bitcoin still surged 25% in August and briefly broke through $80,000. The rally was driven mainly by US spot ETF inflows, short covering, and a catch-up bid from assets that had previously lagged equities.
Two Scenarios Ahead
Looking ahead, two scenarios stand out. In the first, bitcoin continues its upward run — current crypto trading is largely driven by US institutional money, making it less sensitive to signals originating from China's credit conditions. In the second, if US equities pull back as Edwards expects, risk-off sentiment could spill over into bitcoin. Which scenario plays out remains to be seen.