Crypto Market Dips: Opportunities Arise from U.S. Job Surge and Rate Speculations

According to QCP Capital, the market is expected to factor in at least one interest rate cut by the Federal Reserve in 2024. Both Bitcoin (BTC) and Ether (ETH) have experienced declines following unexpectedly strong U.S. employment data, which diminished hopes for a Federal Reserve rate cut in September.

The recent downturn in the prices of these leading cryptocurrencies presents a good buying opportunity, as noted by QCP Capital, a trading firm based in Singapore. The U.S. non-farm payrolls report revealed that the economy added 272,000 jobs in May, significantly surpassing the estimated 185,000 and April’s revised 165,000. Although the unemployment rate edged up to 4%, average hourly earnings increased by 0.4% month-on-month, above the anticipated 0.3% rise. This robust job data caused markets to reduce the likelihood of a 25 basis-point rate cut by the Federal Reserve in September from 85% to 60%, resulting in a drop in risk assets, including cryptocurrencies. Both JPMorgan and Citi have retracted their predictions for a Fed rate cut in July, with some analysts suggesting the possibility of rate hikes or further tightening of liquidity. Consequently, Bitcoin, which was on the verge of breaking $72,000, fell by nearly 3% to $68,400, and Ether along with the CoinDesk 20 index mirrored this decline.

QCP Capital highlighted the challenges the Fed faces in maintaining high rates while other central banks are reducing borrowing costs. The firm commented on the confusion created by the combination of strong payroll numbers and rising unemployment, which led to a risk-off sentiment ahead of upcoming U.S. inflation data and Federal Open Market Committee (FOMC) meetings. They emphasized that this dip is a good buying opportunity as markets are likely to price in at least one rate cut by the Fed, noting the difficulty the U.S. will face in ignoring rate cuts globally.

Last week, both the European Central Bank and the Bank of Canada reduced their rates, initiating an easing cycle among G7 countries. Data from MacroMicro indicates an increase in central banks implementing rate cuts this year. It is anticipated that the Federal Reserve and other central banks might follow suit, engaging in what is often referred to as currency wars, to manage their growing public debts. This trend could inadvertently boost the demand for alternative investments like cryptocurrencies.

QCP Capital observed bullish activity amid the dip, with aggressive put sellers and call spread buyers, particularly in Bitcoin.

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