Bitcoin Set to Soar: Chinese Stimulus Fuels $78K Breakout Hopes
Bitcoin's Bullish Outlook Amid Chinese Stimulus
Bitcoin (BTC) looks poised for a substantial breakout toward $78,000 in the coming weeks, driven by technical chart patterns and China's latest economic stimulus measures. According to a recent Cointelegraph article, 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 Real Vision, argues that China's latest stimulus package is bullish for Bitcoin, noting that it could influence other central banks to follow suit. "The bottom is in for global central bank liquidity for this cycle. Sit back and watch the other CBs fall into line," he stated. Coutts added, "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 significant 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 surged by over 100% following these announcements.
“Bitcoin’s performance remains closely tied to global liquidity conditions, and China’s easing measures could prompt broader shifts in risk appetite,” Coutts highlighted.
Technical Analysis: Bull Flag Breakout
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 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 could see the price drop toward the lower trendline, aligning with the 0.0 Fibonacci retracement trendline of around $5.
For more details on Bitcoin's technical patterns, refer to Cointelegraph's analysis.
Options Market and Reflexivity
The Bitcoin options market is beginning to see "reflexivity season" kick in as traders focus on prices between $80,000 and $90,000. According to Nick Forster, founder of DeFi derivatives protocol Derive, the options market is showing a 30-day call/put skew that continues to "track higher," indicating that traders are betting heavily on upside volatility.
"As prices rise, traders are expecting a continued momentum, driving a self-reinforcing cycle of higher prices," Forster explained. He added that 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 noted, referring partly to the upcoming U.S. presidential election.
While the options market has remained relatively small compared to billions traded daily in the spot market, this could soon change as larger traditional players begin incorporating the contracts into their trading strategies.
Impact of China's Stimulus on Global Markets
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. According to QCP Capital analysts, 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.
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 included cutting interest rates on existing mortgages by 0.5 percentage points and reducing the reserve requirements for banks. These actions were complemented by steps to ease restrictions on borrowing to invest in stocks, boosting the Shanghai Composite Index by more than 4%.
For more insights into the impact of China's stimulus on global markets, visit The Block.