September 26, 2024
By Our Correspondent
Bitcoin appears poised for a significant breakout towards $78,000 in the upcoming weeks, driven primarily by technical indicators on price charts and the recent economic stimulus from China.
On September 24, the People’s Bank of China (PBOC) declared its intention to inject approximately $140 billion into the financial system by reducing the reserve requirement ratio (RRR) by 50 basis points.
This move by the PBOC aims to lower borrowing costs and relax property purchase regulations to support its faltering real estate sector and the broader economy.
Jamie Coutts, the chief crypto analyst at investment management firm Real Vision, asserts that China’s recent stimulus initiative is favorable for Bitcoin, suggesting it may encourage other central banks to adopt similar measures.
“The bottom is in for global central bank liquidity for this cycle. Sit back and watch the other CBs fall into line,” he remarked, further stating:“In a credit-based fiat fractional reserve system, debasement is a feature, not a bug.”
Historically, announcements of stimulus packages from the PBOC have been followed by significant rallies in risk assets, including Bitcoin. For example, the PBOC injected $367.7 billion through reverse repos in October 2023 and $140 billion by lowering the RRR in January 2024.
Following these stimulus announcements, Bitcoin’s price surged by more than 100%.
Notably, the direct correlation between Chinese liquidity and Bitcoin has become less apparent due to the 2021 ban on crypto mining in China.
Nevertheless, as Coutts highlighted, Bitcoin’s performance remains closely linked to global liquidity trends, and China’s easing policies could lead to broader changes in risk appetite.
Further supporting the optimistic outlook is the emergence of a bull flag pattern on Bitcoin’s longer-term chart.
A bull flag pattern forms when the price stabilizes within a descending channel following a significant upward movement.
Typically, this pattern concludes with a breakout above the upper trendline, resulting in a price increase equivalent to the height of the preceding uptrend.
As of September 24, Bitcoin’s price was approaching the upper trendline of its flag, indicating a potential breakout above $78,000, which would set a new all-time high.
On the other hand, a retreat from the upper trendline is likely to drive the price down towards the lower trendline, coinciding with the 0.0 Fibonacci retracement level, approximately around $5.
