Bitcoin (BTC) Eyes Price Breakout as China Unleashes $24.9 Trillion in Liquidity Flood

• Past M2 expansions have strongly correlated with BTC price gains, with yet another rally coming as the largest crypto catches up to the gold rally.
• Crypto analyst Ali Martinez noted that Bitcoin has fallen below its Short-Term Holder Realized Price, indicating a potential “buy the dip” opportunity.

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Although Bitcoin price has crashed all the way to $107,500, down more than 15% from its all-time high levels, it is soon to experience a major liquidity boost. Market experts believe that this time, a liquidity infusion from China will drive the BTC rally ahead.

China’s M2 Money Supply Surge Can Trigger Bitcoin Price Breakout

A new report from Alphractal highlights a sharp increase in China’s M2 money supply, which has now reached $24.9 trillion, overtaking that of the United States. The M2 metrics represent the total money circulating in the economy and are a key indicator of liquidity coming to the market. This usually leads to a strong rally in risk-on assets such as equities and cryptocurrencies.

Historically, growth in China’s M2 supply has shown a strong correlation with Bitcoin’s market performance, as rising liquidity levels often precede upward movements in BTC price.

Source: Alphractal

On the other hand, quantitative easing (QE) measures are also underway in the United States. With the ongoing US shutdown, experts believe that another 25bps rate cut is coming by the end of October. This can eventually trigger a massive rally in BTC and other risk assets. Furthermore, BTC is turning out to be extremely undervalued in comparison to the yellow metal, Gold.

Bitcoin Reaches Deep Oversold Levels Against Gold

Bitcoin has fallen to its most oversold level relative to gold since November 2022, according to the BTC/Gold ratio. This happened as Gold rallied to an all-time high of $4,350, becoming the first asset to hit $30 trillion market cap, as reported by CNF. The last time this ratio reached similar levels, it marked Bitcoin’s macro bottom.

The decline indicates that gold has sharply outperformed in recent weeks, while Bitcoin’s momentum has temporarily cooled. Historically, when the RSI (Relative Strength Index) on the BTC/Gold pair falls to 30 or below, Bitcoin has tended to rebound within weeks, often leading to multi-month uptrends as risk appetite returns.

Source: CoinDesk

While Bitcoin’s price remains weak in USD terms, the BTC/Gold ratio signals that the world’s largest cryptocurrency may be entering a deep value zone relative to traditional “hard money.”

Crypto analyst Ali Martinez highlighted that Bitcoin’s latest decline below the Short-Term Holder Realized Price (STHRP) could signal a potential accumulation opportunity. According to Martinez, the last four instances when Bitcoin fell below this on-chain metric turned out to be major “buy-the-dip” moments for investors.

The STHRP represents the average price at which short-term holders acquired their Bitcoin. It serves as a key indicator of market sentiment and short-term cost basis.

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