QCP Capital has issued a statement evaluating the current situation of Bitcoin and Ethereum, highlighting intensified macro volatility and its implications on the cryptocurrency market.
“Macro volatility has intensified,” stated QCP Capital. “The NASDAQ has declined by 10% from its peak as the Magnificent 7 pulls back. FX carry trades like long USDJPY and short USDMXN are being unwound as volatility increases. The VIX topped at 19.50 after trading in a range of 12-14 for the past 2 months.”
The analysis identifies several factors contributing to this heightened market uncertainty:
- Value at Risk (VaR) Shocks: Risk managers are forcing traders to trim positions. Increased selling causes prices to fall, which then causes volatility to increase in a feedback loop.
- Elevated Equity Valuations and Lofty Earning Targets: When companies fail to hit targets, participants start to second guess their projections for the future. This is exemplified by Microsoft’s recent AI cloud revenue miss, which caused shares to decrease by 8% after hours.
- Global Risk-Off Sentiment: AUDUSD and NZDUSD have collapsed despite the recent USD weakness. Commodities such as oil and copper have declined by 10-15% for the month due to increased fears of a global slowdown.
QCP Capital anticipates increased volatility ahead of tonight’s FOMC meeting. “We do not expect a cut and place higher importance on the statement and Powell’s presser after. Our base case is for one cut in September and December each. We remain wary of a deviation from current expectations, which would trigger risk-off moves across all assets, including crypto. Such a scenario would indicate the Federal Reserve’s perception of heightened economic challenges.”
In the cryptocurrency space, the firm observed a positive development with net inflows of USD 33.7 million in ETH spot ETFs, providing a much-needed boost to ETH prices, which have been lagging behind Bitcoin for the past month. Despite this, QCP Capital foresees continued outflows from ETHE in the next two weeks.
Additionally, the recent movement of 30,000 BTC from the Silk Road by the US government has introduced further uncertainty into the cryptocurrency market.
