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Bitcoin () hodlers need to watch the central banks of China and Japan as well as the United States as BTC/USD battles “huge” resistance.
That was the opinion of trading firm QCP Capital, which in its latest crypto market research piece, “The Crypto Circular,” warned that Bitcoin faces risks far beyond the Federal Reserve.
Bitcoin "most direct global liquidity proxy"
Having survived the latest flood of macroeconomic data from the U.S., Bitcoin is nonetheless flagging right below $25,000 as bulls run out of momentum.
For qcp capital, there is now reason to believe that the risk factors for price performance will not only come from the Fed, but from China and Japan as well.
Market participants are now facing issues such as China's Consumer Price Index (CPI) and the US equivalent, as well as policy changes from Japan's central banks.
While the jury pronounces itself on the value of BTC as a cover of inflation, This is, of course, the most direct indicator of overall liquidity, it is not linked to any central bank or nation," states the authors of the study.
Bitcoin is sensitive to global liquidity, and when central banks inject it, it signals a growth incentive in itself. That argument is already popular, with others also eyeing how “liquidity junkie” Bitcoin will navigate changes in central bank liquidity this year.
"and while we focus on USD liquidity – using the qt and reserve balance of the Federal Reserve, we have missed the massive infusion of liquidity from the Bank of Japan (boj) and the People's Bank of China (pboc) in the last three months," continues qcp.
"Contrary to consensus, central banks added $1 trillion in net liquidity from the bottom of the market in October 2022, with the Central Bank of Canada and the Bank of Canada contributing the most to performance."
QCP refers to the US policy dichotomy with China and Japan—quantitative tightening (QT) versus quantitative easing (QE). Whatever the Fed does, additional liquidity in one place is anything but guaranteed to impact risky assets like cryptography.
“hence, This kind of liquidity injection will probably find its way to cryptography, even in spite of what seems to be the best efforts of the present American administration to avoid this,' he said.
Versus net $1 trillion 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 data from the United States and the Fed's guidance now, who always has the highest beta for market movements, we also need to be aware of the liquidity injections from the Bank of Canada and the Central Bank of Canada," writes QCP.
“Any reversal of liquidity from these 2 sources would remove the underlying support that BTC has seen this past month.”
Research reiterates "double top" warning
Going forward, however, liquidity fans face formidable resistance when it comes to Bitcoin, with order books showing sellers lying in wait en masse closer to $30,000.
Related: Can Bitcoin price hold $24K as stocks correlation hits lowest since 2021?
$25,000 already causes enough problems, warns qcp, recognising that rejection at this level would mean that the mid-2022 resistance remains under control.
As Cointelegraph reported, that issue is also being watched by popular trader and analyst, Rekt Capital.
is pulling back in for a retest
Needs to hold the confluent area below for the retest to be successful #Crypto #Bitcoin https://t.co/ISYqnU5bkY pic.twitter.com/Vx2eV3fLDA
— Rekt Capital (@rektcapital) February 22, 2023
“BTC – A potential double top is forming against the August 2022 correction high, and May 2022 reaction is low at 25,300. Above, we have the enormous resistance 28,800-30,000 which is the neck of the head and shoulders», research confirms.
BTC/USD traded at around $23,700 at the time of writing, near one-week lows, according to data from Cointelegraph Markets Pro and TradingView.
