Bitcoin (BTC) hodlers should watch the central banks of China and Japan, as well as the United States, as BTC/USD battles “enormous” resistance.
That was the view of trading company QCP Capital, which in its latest crypto market research article, “The cryptocurrency”, warned that Bitcoin faces risks far beyond the Federal Reserve.
Bitcoin “the most direct global liquidity proxy”
Having survived the latest onslaught of US macroeconomic data, Bitcoin is, however, marking just below $25,000 as the bulls run out of momentum.
For QCP Capital, there is now reason to believe that risk factors for price performance will not only come from the Federal Reserve, but also from China and Japan.
Market participants must now grapple with issues such as China’s Consumer Price Index (CPI), as well as the US equivalent, along with changes in Japanese central bank policy.
“While the jury is out on the value of BTC 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 argues.
Bitcoin is sensitive to global liquidity, and when central banks inject it, this marks an incentive for growth itself. That argument is already popular, and others are also watching how “liquidity junkie” Bitcoin will navigate changes in central bank liquidity this year.
“And while we are focused on USD liquidity, from the Fed QT and Fed balance, we have missed the massive injection of liquidity from the Bank of Japan (BOJ) and the People’s Bank of China (PBOC) in the last 3 months”, QCP continues.
“Contrary to consensus, central banks have added a net $1 trillion of liquidity from the bottom of the market in October 2022, with the PBOC and BOJ the largest contributors.”
QCP refers to the dichotomy between US and China and Japan policy: quantitative tightening (QT) versus quantitative easing (QE). Regardless of what the Federal Reserve does, additional liquidity in one place is almost guaranteed to turn into risky assets like cryptocurrencies.
“Therefore, such a large liquidity injection will undoubtedly come to cryptocurrencies, even despite what appear to be the best efforts of the current US administration to prevent it,” he says.
Compared to $1 trillion net of liquidity injections, the Fed has reduced its balance sheet to its lowest levels since September 2021.
“What this means is that in addition to the US data and guidance from the Fed now, which ultimately still has the highest beta for market moves, we also need to be mindful of liquidity injections. of the BOJ and the PBOC,” writes QCP.
“Any liquidity reversal from these 2 sources would remove the underlying support that BTC has seen in the past month.”
The investigation reiterates the warning of “double ceiling”
Moving forward, though, 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?
$25,000 is already causing enough trouble, QCP warned, acknowledging that rejection at that level would mean resistance from mid-2022 remains in check.
As Cointelegraph reported, that issue is also being watched by popular trader and analyst, Rekt Capital.
#BTC is going back for a new test
You need to keep the confluent area below for the retest to be successful$BTC #Crypto #Bitcoin https://t.co/ISYqnU5bkY pic.twitter.com/Vx2eV3fLDA
— RektCapital (@rektcapital) February 22, 2023
“BTC: A potential double top is forming against the August 2022 correction high, and the May 2022 reaction is low at 25,300. Above that we have the huge 28,800 to 30,000 resistance which is the head-and-shoulders neckline,” the research confirms.
BTC/USD was trading around $23,700 at the time of writing, near one-week lows, according to data from Cointelegraph Markets Pro and TradingView.
The views, thoughts, and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
