China crypto ban made the sell-off worse, but PBOC balance sheet growth matters more than posturing and is not the only key market driver - rally remains intact

In our crypto flash Monday night, we laid out 9 reasons we thought Bitcoin was close to a bottom around $40k.

But yesterday crypto markets went for a wild ride. We got yet another sharp move lower below $30k but have since bounce back and are now at $41k. 

Part of this was due to leverage liquidations, but part of the move was also sparked by negative news of China banning crypto. 

Source: Fundstrat, Google

This is not the first time China has made such a move. It happened back in December 2013 and September 2017. 

In 2013 it marked the top of the bull market cycle. But in 2017 it preceded a massive move higher. 

We can look at the timeline of these events in the context of Bitcoin’s prior market valuation cycles using the Grider Bitcoin Book Value multiple. 

Source: Fundstrat, Coinmetrics 

After the Bitcoin sell off we just had one question, could this China ban cause us to enter a new bear market or is this just a correction in a bigger move higher?

We think this China news headline posturing impacted the market, but we don’t think it matters as much for the cycle as the People’s Bank of China (PBOC) balance sheet growth.