Bitcoin is expected to hit a new all-time high within two months, or by September, as the People's Bank of China (PBOC) unexpectedly cut its benchmark interest rate to stimulate economic growth, and prominent traders are hyping up the prospect that the cryptocurrency will hit a new all-time high within two months, or by September, highlighting that China's move has become a bullish catalyst for the cryptocurrency.
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CryptoSlate reported that amid continued challenges in the real estate sector and the broader economy, the People's Bank of China lowered the seven-day reverse repurchase rate from 1.8% to 1.7%, the one-year loan prime rate (LPR) from 3.45% to 3.35%, and the five-year loan prime rate (LPR) from 3.95% to 3.85%.
The rate cut, which comes after second-quarter gross domestic product grew at a slower-than-expected 4.7 percent, is aimed at addressing weak consumer demand and deflationary pressures. The real estate sector remains reeling, with major developers facing financial difficulties, with mixed reactions in Asian markets.
As soon as the news of US President Biden's withdrawal from the November election came out, the price of Bitcoin rose from $65,800 to $68,500 a few hours later, but by the time China announced its withdrawal, Bitcoin had fallen back to around $67,800. After the news of the rate cut came out, the price of Bitcoin rose by about 0.5%, but then fell slightly.
The article mentioned that the effectiveness of China's interest rate cuts remains uncertain, and further policy actions may be needed to maintain continued economic recovery.
The move "surprised the market" as Asian stocks showed mixed performance and the yuan exchange rate showed an upward trend due to China's repeated cuts in benchmark interest rates.
"Today's rate cut was an unexpected move, likely due to the sharp slowdown in growth momentum in the second quarter and China's Third Plenum's call to achieve this year's growth target," Larry Hu, chief China economist at Macquarie Group, told the publication.
Market commentator Holger Zschaepitz responded by pointing out that it had been nearly a year since China last cut interest rates.
“Chinese stock markets are less than enthusiastic,” he wrote in a Twitter post.
Lower global interest rates are a key factor in the performance of risky assets, including cryptocurrencies. According to CoinTelegraph, the United States has not yet followed China and Europe in starting a rate cut cycle, which the market expects to begin in September.
Popular cryptocurrency and macro commentator TMXC Trades took a more conservative stance, arguing that China’s selective rate cuts would not have the desired effect.
“Going into 2024, traders were betting on a massive coordinated global easing cycle that would reverse half or more of the tightening. Today, mid-July, almost none of this has materialized,” the report concluded.
Meanwhile, Bitcoin itself faces one last set of resistance before setting a new all-time high, including the $69,000 level that has remained in place since the end of 2021.
“Bitcoin has almost erased the -25.6% retracement,” noted Rekt Capital, a well-known trader and analyst, in its latest analysis.
“It took two weeks to almost completely offset the five-week pullback.”
The accompanying chart compares recent Bitcoin price action with other retracements during the bull run, calculating the latest retracement as the deepest retracement of the uptrend.
Rekt continued in another post: “Any dip to retest $65,000 would not be unusual, but generally such a weekly close precedes a move higher to $71,500.”
He reiterated that Bitcoin will hit a new all-time high by September at the latest.
“Bitcoin has moved back into the range and is providing a lot of strength,” Michaël van de Poppe, founder and CEO of trading firm MNTrading, added that day.
He marked $65,000 as an important support level going forward, with the range low at around $61,000 as the next line of defense below. “If that happens this week, then we are on track to continue to set new all-time highs,” he predicted.
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