Bitcoin Eyes $78K Breakout Amid Chinese Stimulus and Market Optimism
Bitcoin Price Target Rises to $78K After Chinese Stimulus Package
Bitcoin (BTC) looks poised for a significant breakout towards $78,000 in the coming weeks, primarily driven by technical chart patterns and China's latest economic stimulus measures. The People's Bank of China (PBOC) announced on September 24 that it would inject around $140 billion of liquidity into the financial system by cutting the reserve requirement ratio (RRR) by 50 basis points.
Jamie Coutts, chief crypto analyst at investment management firm Real Vision, argues that China's latest stimulus package is bullish for Bitcoin. "The bottom is in for global central bank liquidity for this cycle. Sit back and watch the other CBs fall into line," he noted.
"In a credit-based fiat fractional reserve system, debasement is a feature, not a bug."
The PBOC's previous stimulus package announcements have led to substantial rallies in risk assets like Bitcoin. For instance, BTC's price rose by over 100% following the PBOC's injections of $367.7 billion through reverse repos in October 2023 and $140 billion by reducing the RRR in January 2024.
Adding to the bullish outlook is the formation of a bull flag pattern on Bitcoin’s longer-timeframe chart. This pattern develops when the price consolidates inside a descending channel range after a strong upside move. As a rule, the pattern resolves when the price breaks above the upper trendline and rises as much as the previous uptrend’s height.
As of September 24, BTC’s price was testing its flag’s upper trendline for a potential breakout above $78,000—a new record high. Conversely, a pullback from the upper trendline will likely take the price down toward the lower trendline, aligning with the 0.0 Fibonacci retracement trendline of around $5.
Bitcoin Options Market Points to Feedback Loop of Higher Prices
The Bitcoin options market is beginning to see "reflexivity season" kick in as traders focus on prices between $80,000 and $90,000. Nick Forster, founder of DeFi derivatives protocol Derive, told Decrypt that the options market is starting to see reflexivity, where market participants' actions and expectations influence asset prices, creating a feedback loop.
Forster pointed to the 30-day call/put skew for Bitcoin options contracts as continuing to "track higher," meaning traders are betting heavily on upside volatility and are pricing in more significant market swings. "As prices rise, traders are expecting continued momentum, driving a self-reinforcing cycle of higher prices," he explained.
"The current market sentiment is positioning for potential volatile moves as we approach key political and economic events," Forster said, referring partly to the upcoming U.S. presidential election.
Though the options market has remained relatively small compared to billions traded daily in the spot market, that could soon change as larger traditional players begin incorporating the contracts into their trading strategies alongside speculation in U.S.-based Bitcoin exchange-traded funds.
On Friday, the Securities and Exchange Commission greenlit a rule change request by Nasdaq’s International Securities Exchange to list and trade options on the iShares Bitcoin Trust (IBIT), BlackRock’s popular ETF. While BlackRock’s Bitcoin ETF options approval will likely lead to long-term skew compression or muted volatility, the impact is yet to be felt, Forster said.
"For now, we’re still seeing a strong bid for upside as traders capitalize on the current volatility yields," he added.
China Stimulus Boosts Stocks, but Crypto Remains Stagnant
China’s stimulus lifted global stock indices but failed to shake the cryptocurrency market out of its current stagnation. However, QCP Capital analysts suggest that recent monetary easing in both China and the U.S. could provide near-term support, with market participants expecting an upward move in ether.
China’s broad monetary stimulus package, announced on Tuesday, injected optimism into European and U.S. equity markets, though it had little impact on the cryptocurrency sector, which remained relatively stagnant over the past 24 hours.
QCP Capital analysts noted that China’s aggressive monetary measures, coupled with the U.S. Federal Reserve's recent 50-basis-point rate cut, point to a global trend of easing that may support risk assets, including cryptocurrencies, in the near future. In the context of this easing, QCP Capital highlighted growing positive sentiment toward ether in the derivatives market.
Specifically, they observed a shift in ether options, where the front-end skew has moved from puts to calls, indicating expectations of an upward price movement. "Ether implied volatility is also trading 9% higher than bitcoin, suggesting both upside sentiment and higher expected volatility," they added.
China’s stimulus measures included cutting interest rates on existing mortgages by 0.5 percentage points and reducing the reserve requirements for banks, allowing them to lend more. These actions were complemented by steps to ease restrictions on borrowing to invest in stocks, which sent the Shanghai Composite Index soaring by more than 4% on Tuesday to close at 2,863.13 points.
The People’s Bank of China (PBoC) Governor, Pan Gongsheng, emphasized that these efforts aim to stimulate domestic demand and financial markets, bolstering investor confidence. As a result, global commodity prices, including Brent crude and copper, surged, with Brent crude rising more than 1.4% to nearly $74.28 a barrel, as of the time of writing.
European and U.S. equities rallied, with sectors linked to the Chinese economy seeing notable gains as China's stimulus fueled widespread risk-on sentiment. In London, the FTSE 100 closed up 0.28%, while the STOXX Europe 600 rose 0.65%. In the U.S., the S&P 500 gained 0.21%, the Dow Jones edged up 0.01%, and the Nasdaq advanced 0.55% in early trading.
Overall, while the broader market is experiencing a positive shift due to global monetary easing, the cryptocurrency sector remains cautiously optimistic, with specific bullish signals for Bitcoin and ether.