Key Points
- QCP Capital suggests that Bitcoin and Ethereum are in a ‘buy the dip’ phase due to mixed US economic data.
- Expectations of a future US interest rate cut could potentially trigger a new bull run for cryptocurrencies.
Crypto trading firm QCP Capital, based in Singapore, indicates that Bitcoin (BTC) and Ethereum (ETH) are currently experiencing a “buy the dip” moment. The company attributes this dip to the mixed economic data recently released in the United States.
Bitcoin and Ethereum’s Response to US Economic Data
Reports show that the non-farm payroll data revealed a stronger-than-expected job market progress after a period of tumultuous economic growth. Specifically, 272,000 people were employed in May, exceeding the forecast of 185,000. However, unemployment rose slightly from 3.9% to 4%.
This mixed economic data, along with uncertainties about inflation numbers, triggered a risk-averse reaction from investors. They pulled back from riskier assets like Bitcoin and Ethereum. However, QCP Capital sees this pullback as a buying opportunity for the leading cryptocurrencies. The firm reported observing “bullish flows” during the dip, with investors taking positions suggesting a potential rebound.
In the crypto market, “buying the dip” is a common strategy. Investors try to capitalize on temporary price drops, expecting future price increases. Bitcoin’s price dropped from around $72,000 to $69,000 on Friday. At the time of writing, BTC is trading at $69,443, showing a nominal increase of 0.09% in the past 24 hours. Similarly, Ethereum followed a similar path and is now trading at $3,676.
Possibility of a US Interest Rate Cut
Individuals and market analysts believe that at least one more interest-rate cut is in view from the US. For Bitcoin, a future rate cut could set the cryptocurrency up for a new bull run. Federal Reserve officials anticipate at least three 25-basis points rate reductions this year.
QCP Capital points out the possibility of the US Federal Reserve being pressured to follow other Central banks. The firm noted, “It will be difficult for the US to ignore as the rest of the world continues to cut rates.” Recent rate cuts by the European Central Bank and the Bank of Canada support this point. BitMEX co-founder Arthur Hayes views the move as a positive catalyst for the crypto market. He emphasized that these rate cuts are an attempt by G7 Central Banks to close the interest rate differential with Japan, thereby indirectly strengthening the yen.
Despite QCP Capital’s prediction of eventual US rate cuts, the near future seems to suggest otherwise due to current statistics. Financial data providers like CME Group forecast a near-certain chance (99.4%) that the upcoming FOMC meeting will maintain the current interest rate.
However, economist sentiment, as measured by a poll from Reuters, aligns more with QCP’s view. The poll suggests a possibility of the Fed initiating rate cuts twice this year, with the first one potentially happening in September.
