Bitcoin must leverage $1T central bank liquidity to beat sellers — research

Bitcoin (BTC) hodlers should keep an eye on China and Japan’s central banks, as well as the US, as BTC/USD struggles with “huge” resistance.

This is the opinion of the trading firm QCP Capital, which in its latest study of the cryptocurrency market:Cryptocurrency Circularwarned that Bitcoin faces risks far beyond the Federal Reserve.

Bitcoin “the most direct global liquidity proxy”

Having survived the latest shower of macroeconomic data from the US, Bitcoin nevertheless falls below $25,000 as the bulls lose momentum.

Now QCP Capital has reason to believe that risk factors for price dynamics will come not only from the Fed, but also from China and Japan.

Market participants now have to deal with issues such as China’s consumer price index (CPI), as well as its equivalent in the United States, as well as changes in the policy of the central bank of Japan.

“While the value of BTC as an inflation hedge is not assessed, it cannot be denied that it is the most direct indicator of global liquidity since it is not tied to any one central bank or country,” the study says.

Bitcoin is sensitive to global liquidity, and when central banks pour it in, that in itself is a boost. This argument is already popular, and others are also watching how Bitcoin’s “liquidity junkie” will navigate the changes in central bank liquidity this year.

“And while we have been focused on USD liquidity – from the Fed’s QT and reserve balance, we have missed massive liquidity injections from the Bank of Japan (BOJ) and the People’s Bank of China (PBOC) over the past 3 months,” QCP continues.

“Contrary to popular belief, central banks have added $1 trillion in net liquidity since the market crash in October 2022, with the largest contributors being the NBK and the Bank of Japan.”

QCP refers to the dichotomy between the policies of the US and China and Japan – quantitative tightening (QT) versus quantitative easing (QE). No matter what the Fed does, extra liquidity in one place is almost guaranteed to seep into risky assets like cryptocurrencies.

“Therefore, such a large infusion of liquidity will undoubtedly find its way into crypto, even as the current U.S. administration is doing everything possible to prevent it,” the post reads.

Compared to $1 trillion in net liquidity injections, the Fed has cut its balance to its lowest level since September 2021.

“This means that in addition to US data and Fed guidance now, which ultimately still has the highest beta for market movements, we also have to factor in liquidity injections from the Bank of Japan and the PBOC,” writes QCP.

“Any change in liquidity from these two sources will remove the underlying support that BTC saw last month.”

Fed balance chart (screenshot). Source: Federal Reserve System.

Study echoes ‘double top’ warning

However, in the future, liquidity fans will face huge resistance when it comes to bitcoin, and order books show that sellers are waiting. a lot of closer to $30,000.

Can the price of bitcoin hold at $24K as stock correlation reaches its lowest level since 2021?

$25,000 is already causing enough trouble, the QCP warns, acknowledging that a failure at that level would mean resistance remains under control from mid-2022.

The issue is also being monitored by popular trader and analyst Rekt Capital, Cryptooshala reports.

“BTC – potential double top forming against August 2022 retracement high and May 2022 reaction is at 25,300. Above we have huge resistance 28,800-30,000 which is the Head and Shoulders neck line,” the study confirms .

According to Cryptooshala Markets Pro and trade view.

Hourly candlestick chart BTC/USD (Bitstamp). Source: Trading View

The views, thoughts and opinions expressed here are those of the authors only and do not necessarily reflect or represent the views and opinions of Cryptooshala.

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