Bitcoin appears set for a breakout toward $78,000 in the coming weeks, driven by bullish technical indicators and China’s recent economic stimulus measures.
On 24 September 2024, the People’s Bank of China (PBOC) announced a substantial liquidity injection of around $140 billion into the financial system through a 50 basis point cut in the reserve requirement ratio (RRR).
The move is aimed at boosting China’s struggling real estate sector and broader economy by lowering borrowing costs and easing property purchase regulations.
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Experts Believe That China’s Stimulus Package Is Positive For Bitcoin
Jamie Coutts, chief crypto analyst at investment management firm Real Vision, believes this stimulus package is particularly positive for Bitcoin. He suggests that the PBOC’s action could set a precedent for other central banks to follow, thereby enhancing global liquidity.
“The bottom is in for global central bank liquidity for this cycle. Sit back and watch the other CBs fall into line,” Coutts stated. He highlighted that the current financial system, which is based on credit and fractional reserve banking, inherently involves currency debasement.
“The bottom is in for global central bank liquidity for this cycle,” Coutts 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.”
Historically, similar measures by the PBOC have had a significant impact on risk assets, including Bitcoin.
For instance, following a $367.7 billion injection through reverse repos in October 2023 and another $140 billion added by reducing the RRR in January 2024, Bitcoin’s price surged by over 100%.
These instances suggest a strong correlation between Chinese liquidity measures and Bitcoin’s price performance, despite China’s 2021 ban on cryptocurrency mining.
The relationship between Chinese economic policy and Bitcoin’s market movements may not be immediately obvious, but Coutts emphasizes that Bitcoin’s trajectory is heavily influenced by global liquidity conditions.
He argues that China’s recent moves could trigger a broader appetite for risk assets. It could also providing a favorable backdrop for Bitcoin’s price surge.
So, the Chinese cut the RRR, adding $113 billion of liquidity support to the equity market, potentially setting up a 'stock stabilization fund' and will lower borrowing costs on as much as $5.3 trillion in mortgages and easing rules for second-home purchases.
The bottom is in… pic.twitter.com/auKmc6HCt6
— Jamie Coutts CMT (@Jamie1Coutts) September 24, 2024
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Bullish Technical Pattern Forms
Adding to the optimism is the formation of a bullish technical pattern known as a bull flag on Bitcoin’s longer-timeframe chart.
A bull flag pattern typically appears when the price consolidates in a descending channel after a substantial upward move. This pattern usually resolves with a breakout above the channel, propelling the price upward by the same magnitude as the initial rally.
As of 24 September 2024, Bitcoin was testing the upper boundary of this bull flag pattern. This suggests a potential breakout that could push its price above $78,000—a new all-time high.
This is perhaps one of the biggest weekly bull flag formations I've ever seen in Bitcoin's history.
Be very well prepared because it will be difficult to stop this juggernaut once it takes off. pic.twitter.com/iDj4LT4lNZ
— oddgems ⋈ (@oddgems) September 19, 2024
However, if Bitcoin fails to break through this resistance, it could retrace toward the lower boundary of the flag, which aligns with the 0.0 Fibonacci retracement level, approximately around $55,000.
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Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
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