3 November 2023
In their latest market update, QCP Capital, a crypto asset trading firm headquartered in Singapore, has dissected the recent Bitcoin price movements, attributing the rally to macroeconomic factors rather than the much-anticipated approval of a spot ETF. To recall, the Bitcoin surged from $34,500 to almost $36,000 on Wednesday.
The Main Reason For The Bitcoin Price Rally
The firm’s technical analysis highlighted that Bitcoin reached the 38.2% Fibonacci retracement level at $35,912 and touched the upper channel trendline before retreating, a move that was keenly observed by market participants.
QCP Capital’s report states, “This latest rally, however, was less about spot ETF developments and more about macro forces.” These macro forces were identified following a dovish stance from the Federal Open Market Committee (FOMC) and a smaller than expected Treasury Q1 supply estimate, which led to a significant drop in bond yields. This, in turn, has had a bullish effect on risk assets, including Bitcoin and the broader crypto market.
However, the firm also had a word of caution, saying, “Whether this marks the start of a new global equity and bond uptrend remains to be seen, as the macro picture essentially remains unchanged, outside a correction of overly bearish bond sentiment.”
The firm also noted the Bitcoin derivatives market, where “perp funding, and term forwards, implied volatility and risk reversals across the curve continue to remain or extend further at extreme elevated levels.” This suggests a market bracing for a significant move, with derivative traders positioned for a potential upside breakout that hinges on the approval of a spot ETF.
Looking at the broader financial landscape, the bond market has been experiencing notable fluctuations. Recently, the 30-year Treasury yield has reached another 16-year high, climbing above 5%. This level of yield has not been seen since 2007, and it represents a rise of over 4 percentage points in just three years. Such movements in the bond market are critical for the Bitcoin and crypto market as they affect the risk sentiment among investors.
However, Bitcoin is currently following the example of gold as a safe haven asset. ”The market is starting to price in the Fed’s overtightening and weakening economics. Combined with geopolitical tensions + war, the need for QE in the future is increasing rapidly. This is causing insurance assets (Gold, Bitcoin) to absolutely rip in unison,” Carpriole Investment’s Charles Edwards remarked recently.
In summary, QCP Capital’s insights into Bitcoin market dynamics versus current bond market trends suggest that while the Bitcoin market is influenced by a variety of factors, including speculation about exchange-traded fund approval, macroeconomic indicators such as bond yields play a larger role in determining market sentiment and price action than other pundits believe.
At press time, Bitcoin was trading at $34,235 and at risk of breaking out of the established uptrend channel to the downside. If that happens, low price levels could come next.