Bitcoin Set to Soar: Chinese Stimulus Sparks $78K Target
Bitcoin Price Target Rises to $78K After Chinese Stimulus Package
Bitcoin (BTC) looks ready to undergo a substantial breakout toward $78,000 in the coming weeks, primarily due to price chart technicals and China’s latest economic stimulus.
On Sept. 24, the People’s Bank of China (PBOC) announced that it would inject around $140 billion of liquidity into the financial system by cutting the reserve requirement ratio (RRR) by 50 basis points. The PBOC has lowered borrowing costs and eased property purchase rules to shore up its struggling real estate market and the wider economy.
“The bottom is in for global central bank liquidity for this cycle. Sit back and watch the other CBs fall into line,”
Jamie Coutts, chief crypto analyst at investment management firm Real Vision, argues that China’s latest stimulus package is bullish for Bitcoin, pointing out that it would influence other central banks to follow suit. He added:
“In a credit-based fiat fractional reserve system, debasement is a feature, not a bug.”
The PBOC’s recent stimulus package announcements have preceded huge rallies in risk assets like Bitcoin. For instance, the PBOC injected $367.7 billion through reverse repos in October 2023 and $140 billion by reducing the RRR by 50 basis points in January 2024. Bitcoin’s price rose by over 100% following the stimulus package announcements.
Interestingly, the direct connection between Chinese liquidity and Bitcoin is less obvious due to the 2021 crypto mining ban in China. However, as Coutts pointed out, Bitcoin’s performance remains closely tied to global liquidity conditions, and China’s easing measures could prompt broader shifts in risk appetite.
Technical Analysis: Bull Flag Breakout Eyes $78K
Adding to the bullish outlook is the formation of a bull flag pattern on Bitcoin’s longer-timeframe chart. A bull flag 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 Sept. 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.
As Cointelegraph reported, BTC may need to rise well above $80,000 to achieve a new all-time high value when adjusted for inflation.
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. Traders seeking to divine Bitcoin’s next major price swing need look no further than the derivatives market, specifically options contracts.
That’s according to Nick Forster, founder of DeFi derivatives protocol, Derive, who told Decrypt on Monday that the options market is beginning to see “reflexivity season kick in.” Reflexivity refers to the idea that market participants' actions and expectations influence asset prices, and in turn, changing prices affect participants' behavior, creating a feedback loop.
“As prices rise, traders are expecting a continued momentum, driving a self-reinforcing cycle of higher prices,”
Forster explained, adding that those traders are punting on a price between $80,000 and $90,000 by November’s end. “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.
“For now, we’re still seeing a strong bid for upside as traders capitalize on the current volatility yields,”
Forster said.
China's 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. Meanwhile, 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.
However, QCP Capital 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.
On the macroeconomic front, China’s stimulus measures, designed to lower borrowing costs and boost economic activity, 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.