- Bitcoin’s recent surge received a boost of confidence from the East.
- Despite bitcoin slipping into overbought territory, selling pressure remains in check.
A few weeks ago, we covered China’s decision to tone down its stance on Bitcoin [BTC] and the entire crypto market. The ramifications of that decision have now been seen in BTC’s recent performance.
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Recent data suggests that China is increasingly contributing to the amount of liquidity flowing into BTC. Several factors contributed to this observation. For example, the latest PMI data showed that China’s manufacturing sector contracted in April. As a result, investors shifted their attention to other things, which BTC benefited from.
The data also showed that the Chinese central bank used open market operations to inject more money into the financial system. This may have encouraged more Chinese investors to acquire more BTC.
In addition, the short-term interest rate in China has recently fallen to a 10-month low, prompting increased borrowing. Some of the cheaply borrowed liquidity may have found its way into BTC.
Will the bears continue to quench their thirst for Chinese liquidity?
A scenario in which China suddenly raises lending rates would penalize BTC. Maybe even force some to sell. Such an outcome would likely have a negative impact on BTC. That being said, investors should take note of the fact that China is currently among the markets that are heavily contributing to the recent BTC demand and rally.
BTC’s on-chain characteristics can also tell us quite a bit about its current position and prevailing demand. At the time of writing, despite the year-to-date periods, there has been an increase in the average coin age of BTC.
Source: CryptoQuant
Additionally, BTC’s dormant state has seen some downward movement over the past few days since June 23rd. It was also significantly lower than at the end of May. This reflected the selling pressure seen in late May as traders took profits. Interestingly, at press time, BTC was priced at $30,580, now at the previous YTD peak in April.
Source: TradingView
Can Chinese liquidity help push prices to new year-to-date highs? This Asian liquidity has certainly contributed to the recent bullish momentum and could potentially support the recent highs. However, traders should consider the fact that BTC recently entered overbought territory last week. Expectations of selling pressure are therefore significantly higher.
Additionally, the BTC supply distribution revealed something interesting about the current state of the market. Whales did not contribute as much to the selling pressure as one would expect, especially after being overbought.
Source: Santiment
How much is 1,10,100 BTCs worth today?
The above results suggest that there is still some confidence in BTC’s upside potential. Especially now that the demand from the East is increasing.
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