Bitcoin due 'capital reallocation' as China halts stimulus — Analysis

Bitcoin ( BTC ) and crypto should see a fresh liquidity boost despite China halting economic stimulus, analysis says.

In its latest bulletin to Telegram channel subscribers on Oct. 8, trading firm QCP Capital predicted a “capital reallocation” to crypto markets.

Bitcoin, crypto stand to gain from China moves

BTC price action gave up gains into the Oct. 7 daily close as geopolitical tensions combined with news that China would not inject further stimulus measures — a disappointing outcome for risk assets.

BTC/USD briefly dipped below $62,000 ahead of the Oct. 8 Wall Street open as US stocks futures declined in step, data from Cointelegraph Markets Pro and TradingView shows.

BTC/USD 1-hour chart. Source: TradingView

Despite what it calls “near-term downside risks” for stocks due to the week’s US macro data drops, QCP nonetheless sees conditions improving for crypto sooner rather than later.

“As the Chinese rally wanes, we anticipate capital reallocation back into crypto, reflecting the industry’s growing maturity as an alternative risk-on asset,” it stated.

That outlook chimes with the more optimistic positions held by crypto market observers regarding the rest of October and Q4.

As Cointelegraph reported , some still see Bitcoin delivering strong gains in a classic “Uptober” performance, while global liquidity trends should likewise bolster risk assets en masse through year end.

“We foresee near-term downside risk for equities due to upcoming earnings season and CPI release, which may challenge their lofty valuations. Geopolitical tensions further complicate the outlook,” QCP summarized.

“However, we maintain a medium-term optimistic stance, expecting election headlines to continue driving crypto movement.”

US dollar drops BTC price “reality check”

Considering BTC price strength as a whole, meanwhile, traders broadly saw the need for caution on low timeframes.

Related: 'Definition of a leverage driven pump' — 5 Things to know in Bitcoin this week

The China setback boosted the US dollar index (DXY), typically a headwind for crypto performance, in addition to pressuring US stocks.

US dollar index (DXY) 1-day chart. Source: TradingView

“Gut is telling me these early week crypto pumps might have been a trap,” popular trader Bluntz told followers in part of a post on X , referring to strong weekend performance for BTC/USD. 

“Had a good look at dxy and es today and gave myself a bit of a reality check.”

BTC/USD 12-hour chart. Source: Bluntz/X

DXY, which at the start of the month traded at its lowest levels since July 2023, stood at 102.37 at the time of writing, up 1.6% month-to-date.