Following the People’s Bank of China’s announcement of the previous two stimulus packages, bitcoin saw a significant increase in value.
Because of price chart technicals and China’s most recent economic stimulus, Bitcoin BTC$63,562 looks poised for a significant breakout toward $78,000 in the upcoming weeks.
Analyst: Central bank liquidity will increase demand for Bitcoin.
The People’s Bank of China (PBOC) declared on September 24 that it would lower the reserve requirement ratio (RRR) by 50 basis points to add about $140 billion in liquidity to the banking system.
To support the faltering real estate sector and the overall economy, the PBOC has reduced borrowing costs and loosened restrictions on property purchases.
Chief cryptocurrency analyst Jamie Coutts of Real Vision Investment Management said China’s most recent stimulus plan is good news for Bitcoin since it will likely lead other central banks to do the same.
“Global central bank liquidity is at its lowest point for this cycle. He said, “Sit back and watch the other CBs fall into line.”
“In a credit-based fiat fractional reserve system, debasement is a feature, not a bug.”
Huge rises in risky assets like Bitcoin have preceded the PBOC’s latest announcements of stimulus packages. For example, in October 2023, the PBOC injected $367.7 billion through reverse repos, and in January 2024, it reduced the RRR by 50 basis points to inject $140 billion.
After the stimulus package announcements, the price of bitcoin increased by more than 100%.
Curiously, the direct relationship between Chinese liquidity and Bitcoin is less evident now that China has banned cryptocurrency mining in 2021.
However, as Coutts said, the performance of Bitcoin is still strongly correlated with the state of global liquidity, and China’s relaxing policies may lead to more significant changes in risk appetite.
Technical analysis: Indicators of a bullish breakout of $78K
The longer-term chart of Bitcoin has a bull flag pattern forming, which supports the optimistic outlook.
After a significant upward advance, the price consolidates inside a falling channel range, forming a bull flag pattern. Generally speaking, the pattern breaks above the upper trendline and climbs to the height of the previous upswing.
As of September 24, the price of bitcoin was attempting to break above $78,000, a new record high, by testing the upper trendline of its flag.
In contrast, a retreat from the upper trendline will push the price toward the lower trendline, which will line up with the $5 0.0 Fibonacci retracement trendline.
As noted, for Bitcoin to reach a new all-time high that accounts for inflation, it might need to climb well above $80,000.
