Bitcoin and Ethereum have faced significant pressure since Friday following the release of U.S. jobs data that exceeded expectations, quashing hopes for a Federal Reserve rate cut in September.
Singapore-based trading firm QCP Capital sees the recent price drop, spurred by the robust employment report, as a good buying opportunity. According to QCP Capital, investors should seize this moment to enter the cryptocurrency market.
The non-farm payroll data revealed that the U.S. economy added 272,000 jobs in May, far surpassing the anticipated 182,000 jobs and the downwardly revised 165,000 jobs in April. Although the unemployment rate rose to 4%, average hourly earnings increased by 0.4% month-on-month, beating expectations of a 0.3% rise.
This strong job growth led markets to reduce the probability of a 25-basis point Federal Reserve rate cut in September from 85% to 60%, causing a decline in risk assets, including cryptocurrencies. As a result, JP Morgan and Citi canceled their forecasts for a rate cut in July, with some analysts predicting potential rate hikes or further liquidity tightening. Bitcoin, which had been approaching the $72,000 mark, fell nearly 3% to $68,400, with Ethereum experiencing a similar decline.
Market Liquidity and Crypto Rebound
QCP Capital noted that the Federal Reserve might struggle to maintain high interest rates while other central banks are lowering borrowing costs. The firm stated: “The non-farm payroll report surprised us, as it was confusing enough to stimulate risk aversion ahead of U.S. inflation numbers and this week’s Federal Reserve meeting.”
QCP Capital believes that this is a prime buying opportunity as markets will likely price in at least one Federal Reserve rate cut. They argue that the U.S. will find it difficult to ignore the global trend of rate cuts, as evidenced by recent moves from the European Central Bank and the Bank of Canada. Last week, both institutions lowered their interest rates, initiating a cycle of monetary easing among the Group of Seven (G7) countries.
Conclusion
As central banks around the world cut interest rates, leading to increased market liquidity, the demand for alternative investments like cryptocurrencies is expected to rise. Investors are encouraged to capitalize on the current market conditions and potential growth opportunities in the cryptocurrency sector.
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