Central banks have injected $1 trillion in liquidity since October 2022

according to analyze Central banks have added $1 trillion in net liquidity since the market bottomed in October 2022, according to QCP Capital. The People’s Bank of China (PBOC) and the Bank of Japan (BOJ) were the biggest contributors to this liquidity injection. Bitcoin is considered the most immediate proxy for global liquidity and the notable exception that has prevented the cross-asset sell-off seen in other markets.


Global central bank liquidity changes: People’s Bank of China (yellow), the Bank of Japan (Red), the Federal Reserve (Black)

However, QCP questioned whether the rebound of BTC is the beginning of a new round of bull market or a Wile E Coyote-style fall into the abyss without knowing it? While yields and risk assets have diverged in the past, QCP expects the market to take a breather from current highs. The next data from non-farm payrolls, the consumer price index and the FOMC meeting will be key to moving the market.


Upcoming risk events in 2023

The QCP sees risks tilted to the downside, as liquidity injections from the Bank of Japan and the People’s Bank of China will moderate in the second quarter, while the Federal Reserve’s (Fed) quantitative tightening policy continues to run at full capacity. In addition to US data and Fed guidance, traders also need to be aware of liquidity injections from the Bank of Japan and the People’s Bank of China. The QCP will also keep a close eye on China’s consumer price index for signs of when the People’s Bank of China will be forced to slow the pace of stimulus.

In terms of BTC and ETH, BTC is still catching up with the gains of other markets in the past year, while ETH is struggling to break through the support-turned-resistance level of $1700-2030. A potential double top is formed with a corrective top in August 2022 and a reactionary bottom in May 2022 at $25,300. The massive resistance at $28,800-30,000 is the neckline of the head and shoulders pattern, and until these levels are broken, the 5th wave count remains valid. ETH’s last wave 5 count is still in effect, short entry for QCP will be weekly MACD crossover, likely after sell news from Shanghai consolidation.


price chart Bitcoin | Source: Tradingview

ETH price chart | Source: Tradingview

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