Bitcoin has been on a strong upward trend lately, reaching a new yearly high of $36,000 on Wednesday. Many analysts have attributed this surge to the anticipation of a spot Bitcoin ETF, which could boost the demand and liquidity of the cryptocurrency. However, QCP Capital, a Singapore-based crypto trading firm, has a different perspective.
In their latest market update, QCP Capital argues that the main driver of Bitcoin’s rally is not the ETF speculation, but rather the macroeconomic factors that have influenced the bond market. According to their report, the Federal Open Market Committee (FOMC) adopted a dovish stance and the Treasury Q1 supply estimate was lower than expected, leading to a sharp drop in bond yields. This, in turn, has had a positive impact on risk assets, including Bitcoin and other cryptocurrencies.
QCP Capital’s technical analysis shows that Bitcoin reached the 38.2% Fibonacci retracement level at $35,912 and touched the upper channel trendline before pulling back, a move that was closely watched by the market. The firm states, “This latest rally, however, was less about spot ETF developments and more about macro forces.”
However, the firm also cautions that the macro picture remains largely unchanged, except for a correction of overly bearish bond sentiment. The firm notes that the Bitcoin derivatives market is still showing signs of extreme bullishness, with high levels of perp funding, term forwards, implied volatility, and risk reversals across the curve. This suggests that the market is expecting a significant move, with derivative traders betting on a potential upside breakout that depends on the approval of a spot ETF.
The bond market has been experiencing significant fluctuations lately, with the 30-year Treasury yield reaching a 16-year high of over 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 crucial for the Bitcoin and crypto market, as they affect the risk appetite of investors.
However, Bitcoin is currently following the example of gold as a safe haven asset. Charles Edwards, a crypto analyst and founder of Capriole Investments, commented recently, “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.”