BTC price action is almost guaranteed to benefit from additional central bank liquidity, but the higher journey is fraught with difficulty, says QCP Capital.
The name of Bitcoin
BTC has been done
The typewriters go down
$23,234
As BTC/USD faces “big” resistance, hodlers should watch China and Japan as well as US central banks.
Such was the view of trading firm QCP Capital, which warned in its latest crypto market research, “The Crypto Circular,” that bitcoin faces risk far beyond the Federal Reserve.
Bitcoin is the “most direct global liquidity proxy”.
Bitcoin, which has survived the latest deluge of US macroeconomic data, is still flagged just below $25,000 as the bull runs out.
For QCP Capital, there is now reason to believe that the risk factors for price action will come not just from the Fed – but from China and Japan.
Market participants will now have to contend with China’s Consumer Price Index (CPI) as well as Japanese central bank policy changes from their US counterparts.
While the jury is out on BTC’s value as an inflation hedge, it is undeniably the most direct global liquidity proxy, as it is not tied to any central bank or nation, the research said.
Bitcoin is sensitive to global liquidity, and when central banks inject it, this encourages itself to grow. That debate is already popular, with others also looking at how “liquidity junkies” bitcoin will navigate changes in central bank liquidity this year.
“And while we focus on US liquidity – through the Fed’s QT and reserve balances, we missed the massive liquidity injections from the Bank of Japan (BOJ) and the People’s Bank of China (PBOC) over the last 3 months,” QCP continues .
“Contrary to consensus, central banks have added a net $1 trillion in liquidity since the October 2022 market bottom, with the PBOC and BOJ contributing the most.”
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, excess liquidity in one place is almost guaranteed to flow into risky assets like crypto.
“There is no doubt, therefore, that such a huge injection of liquidity will find its way into crypto despite all the apparent efforts of the current US administration to prevent this,” it said.
Against net $1 trillion in liquidity injections, the Fed reduced its balance sheet to its lowest level since September 2021.
“This means that now in addition to US data and Fed guidance, which ultimately still holds the highest beta for market movements, we also need to be aware of BOJ and PBOC liquidity injections,” QCP writes.
“A reversal of liquidity from these 2 sources would remove the underlying support that BTC has seen these past months.”
The research reiterates the ‘double top’ warning.
But going forward, when it comes to bitcoin, liquidity enthusiasts are facing huge resistance, with order books finding sellers being ambushed en masse close to $30,000.
Related: Can Bitcoin Price Hold $24K as Stock Correlation Hits Lowest After 2021?
The QCP warned that $25,000 was already causing enough trouble and agreed that rejection at that level would keep resistance under control by mid-2022.
As reported by Cointelegraph, this question is also being watched by popular trader and analyst Rect Capital.
“BTC – A potential double top is forming against the August 2022 correction high, and the May 2022 reaction low is 25,300. Above that we have major resistance at 28,800-30,000, which is the head and shoulders neckline,” he said. Such research confirms
At the time of writing, BTC/USD was trading at around $23,700, close to a one-week low, according to data from Cointlegraph Markets Pro and TradingView.
