Bitcoin Must Leverage $1T Central Bank Liquidity To Beat Sellers – Research
Bitcoin (BTC) hodlers need to watch the central banks of China and Japan as well as the US as BTC/USD battles “enormous” resistance.
That was the opinion of trading firm QCP Capital, which in its latest crypto market survey, “The Crypto Circular,” warned that Bitcoin faces risks far beyond the Federal Reserve.
Bitcoin “Most Direct Global Liquidity Proxy”
After surviving the latest deluge of US macroeconomic data, Bitcoin is still flagging just below $25,000 as bulls run out of momentum.
For QCP Capital, there is now reason to believe that risk factors for price developments will not only come from the Fed, but China and Japan.
Market players now have to contend with such issues as China’s Consumer Price Index (CPI) as well as its equivalent in the US, along with changes in Japan’s central bank.
“While the jury is out on BTC’s value as an inflation hedge, it cannot be denied that it is the most direct global liquidity proxy, as it is not tied to any central bank or nation,” the research claims.
Bitcoin is sensitive to global liquidity, and when central banks add to it, this marks an incentive for growth in itself. That argument is already popular, and others also see how “liquidity junkie” Bitcoin will navigate changes in central bank liquidity this year.
“And while we were focused on USD liquidity – from the Fed’s QT and Reserve balance sheet, we missed the massive liquidity injection from the Bank of Japan (BOJ) and the People’s Bank of China (PBOC) over the past 3 months,” QCP continues.
“Contrary to consensus, central banks have net added $1 trillion in liquidity since the market bottom in October 2022, with the PBOC and BOJ the biggest contributors.”
The QCP refers to the dichotomy between US policy and China and Japan – quantitative tightening (QT) versus quantitative easing (QE). Regardless of what the Fed does, extra liquidity in one place is guaranteed to seep into risk assets like crypto.
“Therefore, such a large infusion of liquidity will undoubtedly find its way into crypto, even despite what appears to be the current US administration’s best efforts to prevent it,” it said.
In contrast to net liquidity injections of $1 trillion, the Fed has reduced its balance sheet to the lowest levels since September 2021.
“This means that aside from US data and Fed guidance now, which ultimately still has the highest beta for market moves, we also need to be mindful of BOJ and PBOC liquidity injections,” QCP writes.
“Any reversal of liquidity from these two sources will remove the underlying support that BTC has seen over the past month.”
Research reiterates “double top” warning
Going forward, however, liquidity fans face formidable resistance when it comes to Bitcoin, with order books showing sellers on the prowl a lot closer to $30,000.
Related: Can Bitcoin Price Hold $24K as Equity Correlation Hits Lowest Since 2021?
$25,000 is already causing enough trouble, QCP warns, acknowledging that rejection at that level would mean resistance from mid-2022 remains in control.
As Cointelegraph reported, this issue is also being monitored by the popular trader and analyst, Rekt Capital.
“BTC – A potential double top is forming towards the August 2022 correction high and the May 2022 reaction low at 25,300. Beyond that we have the huge resistance at 28,800-30,000 which is the head and shoulders neck, the research confirms.
BTC/USD was trading around $23,700 at the time of writing, near a one-week low, according to data from Cointelegraph Markets Pro and TradingView.
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