PANews reported on May 7th that QCP Capital, a Singapore-based crypto investment institution, stated that the rapid fluctuation of the Taiwan dollar quickly affected the regional foreign exchange market. The Hong Kong dollar/US dollar currency pair was notably impacted, with the Hong Kong dollar exchange rate climbing to the strong end of the trading range, approaching the lower limit of 7.75 in its pegged exchange rate. The Hong Kong Monetary Authority took decisive action, selling 73.3 billion Hong Kong dollars in two operations to defend the linked exchange rate system, with significant effect. The Hong Kong interbank offered rates (HIBOR) plummeted across the board, and hedge funds closed out their US dollar/Hong Kong dollar carry trades, with the one-month rate dropping nearly 60 basis points in a single day. The market is currently stable, but if the Hong Kong dollar continues to strengthen, HIBOR rates may fall further, potentially leading to a more disorderly unwinding of positions.
The foreign exchange market's position liquidation also sparked market speculation about easing US trade tensions. Bitcoin quickly responded, rising 3% to $97,000 and erasing the weekend's decline. However, this rise was not solely driven by the foreign exchange market. Another catalyst came from New Hampshire, where the state governor approved a landmark measure establishing the first state-level Bitcoin reserve. The legislation allows up to 5% of public funds to be allocated to cryptocurrencies and precious metals. Currently, due to a market capitalization threshold of $50 billion, Bitcoin is the only digital asset that qualifies. Although this is a small policy adjustment at the state level, it represents a significant step towards the institutional future of cryptocurrencies.
