Despite China’s suspension of economic stimulus, Bitcoin (BTC) and cryptocurrency are expected to see a new increase in liquidity.
Trading company QCP Capital predicted ‘capital reallocation’ to the cryptocurrency market in its latest bulletin board for Telegram channel subscribers on October 8.
Bitcoin, Cryptocurrency Stands to Benefit from China Move
A combination of geopolitical tensions and news that China would not deploy additional stimulus caused BTC price action to give up its gains at the daily close on October 7. This is a disappointing result for a risk asset.
BTC/USD briefly fell below $62,000 ahead of the Wall Street open on October 8 as U.S. stock futures edged lower, according to data from Cointelegraph Markets Pro and TradingView.
BTC/USD 1-hour chart. Source: TradingView
Despite “near-term downside risk” for stocks due to this week’s drop in US macro data, QCP believes the situation for cryptocurrencies will improve soon.
“As China’s rally weakens, we expect to see a reallocation of capital back towards cryptocurrencies, reflecting the industry’s increasing maturity as an alternative risk asset,” it said.
This outlook is consistent with the more optimistic stance held by cryptocurrency market observers for the remainder of October and the fourth quarter.
As Cointelegraph reports, some still see Bitcoin poised to benefit greatly from its classic “Uptober” performance, with global liquidity trends similarly likely to bolster risk assets overall through the end of the year.
“We expect there to be near-term downside risk to the stock due to the upcoming earnings season and CPI release, which could challenge its lofty valuation. Geopolitical tensions further complicate the outlook,” QCP summarized.
“However, we remain optimistic in the medium term as we expect election headlines to continue to drive cryptocurrency movements.”
US Dollar, BTC Price Fall “Reality Check”
Meanwhile, given the overall BTC price strength, traders have generally recognized the need to be cautious during low periods.
relevant: ‘The Definition of a Leverage-Driven Pump’ — 5 Things to Know in Bitcoin This Week
In addition to putting pressure on U.S. stocks, the China setback also boosted the U.S. Dollar Index (DXY), which is usually a headwind to cryptocurrency performance.
This is the 1-day chart of the US Dollar Index (DXY). Source: TradingView
“Gut said the cryptocurrency pump earlier this week may have been a trap,” celebrity trader Bluntz told his followers in part of a post on X, referencing BTC/USD’s weekend strength.
“I took a good look at dxy and es today and did a little reality check.”
BTC/USD 12-hour chart. Source: Bluntz/X
DXY, which traded at its lowest level since July 2023 earlier this month, is up 1.6% month-to-date at 102.37 at the time of writing.
This article does not contain investment advice or recommendations. All investment and trading activities involve risk and readers should conduct their own research when making any decisions.