Last night, the U.S. markets’ interventions in support and liquidity provided much-needed relief to the panic-stricken markets, particularly the cryptocurrency sector. This was evident through substantial spot purchases on Coinbase’s order books, highlighted by Singapore-based crypto investment firm QCP Capital. By the close of the U.S. trading session, Bitcoin (BTC) surged to $56,000, and Ethereum (ETH) rose to $2,500, reinforcing this trend.
Sharp Recovery in Macro Markets
Today marked a significant rebound in macro markets. The Japanese stock market saw a 9% increase after a 12% decline the previous day. U.S. futures also indicate a potential recovery, buoyed by ISM data showing July growth in the services sector.
QCP Capital’s analysis suggests caution, noting it’s too early to declare market normalization as the Volatility Index (VIX) remains above 30, following yesterday’s peak above 65. Consequently, market volatility and fluctuations are expected to persist. Crucial announcements from the Fed and the Bank of Japan (BoJ) are anticipated, with BoJ Deputy Governor Uchida speaking on Wednesday and the Fed’s Jackson Hole conference from August 22-24.
Will the Fed Cut Interest Rates?
Analysts at QCP Capital consider the possibility of an emergency interest rate cut by the Fed. However, they deem its chances low since such a measure would undermine the Fed’s credibility and incite market panic, furthering recession fears.
Actionable Insights
- Spot market purchases of BTC and ETH might be advisable after recent sharp declines.
- Monitor upcoming Fed and BoJ announcements for strategic market decisions.
- Expect continued market volatility despite short-term relief from U.S. market support.
Yesterday’s wave of risk aversion led to the liquidation of many leveraged positions. QCP Capital suggests that the sharp price drop may present an opportunity to buy BTC and ETH on the spot market. Despite the ongoing uncertainty, U.S. support has provided temporary relief. Market participants will keenly observe forthcoming policy announcements to guide their strategies in the coming days.