According to analysts at QCP Capital, price volatility in the cryptocurrency market, especially Bitcoin (BTC), is expected to decrease as investors prepare for a possible interest rate cut cycle by the US Federal Reserve.
The firm expects market activity to calm as investors position themselves for possible Fed rate cuts ahead of next week's U.S. nonfarm payrolls report.
“We expect market volatility to continue its downtrend as the market positions for possible Fed rate cuts ahead of next week’s U.S. nonfarm payrolls report,” QCP Capital said.
The upcoming nonfarm payrolls report and Friday’s GDP data are seen as key indicators that could provide more clarity on the likelihood and magnitude of a rate cut at the next Federal Open Market Committee (FOMC) meeting on September 18. These economic data points are expected to play a significant role in shaping market sentiment and the Fed’s interest rate decisions.
Nonfarm payrolls data, due on Friday, September 6, is a key metric that could affect the Fed’s interest rate path. The previous report, released in early August, showed that the U.S. unemployment rate unexpectedly rose from 4.1% to 4.3%, triggering a sell-off in global markets on concerns that the Fed could fall behind in its interest rate-cutting efforts.
QCP Capital also pointed out the impact of the US GDP report on Bitcoin’s price performance, but they believe it will have a smaller impact on the cryptocurrency market, especially if it aligns with the prevailing narrative of a slowing US economy. While there are signs of an economic slowdown, the possibility of a recession remains uncertain.
The firm’s analysts noted that derivatives market participants are hedging against potential near-term downside risks for both Bitcoin and Ethereum. “The fact that risk reversals are still on the sell side for both Bitcoin and Ethereum through October suggests that the market is cautious about downside risks,” they added.
*This is not investment advice.