Markets will increasingly price in at least one Fed interest-rate cut for 2024, QCP Capital said.
Bitcoin (BTC) and ether (ETH) have lost steam since Friday’s hotter-than-expected U.S. jobs data damped hopes for a Federal Reserve interest-rate cut in September.
The post-report price swoon in the two largest cryptocurrencies offers a good opportunity to pick up bargains, according to QCP Capital, a Singapore-based trading firm.
Friday’s non-farm payrolls data showed the U.S. economy added 272,000 jobs in May, way more than the 185,000 estimated and well ahead of April’s downwardly revised 165,000. While the jobless rate ticked higher to 4%, average hourly earnings, the sticky inflation component, rose 0.4% month-on-month, above the expectation of a 0.3% rise.
Markets immediately trimmed the probability of a 25 basis-point Fed rate cut in September to 60% from 85%, sending risk assets, including cryptocurrencies, lower. JPMorgan and Citi scrapped forecasts for a Fed rate cut in July, while some observers put rate increases or additional liquidity tightening back on the agenda. Bitcoin, which looked primed for a breakout above $72,000, fell almost 3% to $68,400, according to CoinDesk data. Ether and the CoinDesk 20 index followed bitcoin’s lead.
QCP Capital said the Fed will have trouble keeping rates elevated while other central banks reduce borrowing costs.
“Strong upside surprised on NFP (272K vs 182k), higher payrolls came with higher unemployment (3.9% to 4.0%). It was confusing enough to trigger a risk-off ahead of U.S. inflation numbers and FOMC,” the firm said in a market update.
“We agree that this is a good opportunity to buy the dip as the markets will increasingly price in at least one Fed rate cut from here. It will be difficult for the U.S. to ignore as the rest of the world continues to cut rates,” QCP Capital said.
The European Central Bank and the Bank of Canada cut rates last week, leading the Group of Seven (G7) to start a so-called easing cycle. According to MacroMicro, the number of central banks whose most recent moves have been rate cuts has increased this year.
Other central banks, including the Fed, may soon join the fray in tit-for-tat rate reductions (often called currency wars) as a part of a strategy to manage their burgeoning public debts, inadvertently boosting demand for alternative investments like cryptocurrencies.
“Our desk saw bullish flows on this dip, both sellers of aggressive puts and buyers of call spreads, especially in BTC,” QCP said.
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Source: Vietnam Insider