A Weakening Dollar Could Open the Door for Bitcoin Buyers

According to QCP Capital’s latest report, while the U.S. economy shows signs of slowing, it still maintains resilience. Core inflation remains near 3%, and the potential for a gradual shift in the Federal Reserve’s policy stance is emerging.

The firm noted that the latest market correction was less about policy changes and more about portfolio repositioning. Rising long-term bond yields and a brief strengthening of the dollar prompted profit-taking, particularly in technology and AI-related stocks.

Gold Hits Record Highs — What Does It Mean for Bitcoin?

Gold recently crossed the $4,000 per ounce threshold, highlighting a renewed safe-haven demand. QCP Capital emphasized that “a more flexible, lower interest rate stance from the Fed could create a ‘Goldilocks’ environment for both gold and Bitcoin.”

Asian Markets Provide Supportive Liquidity

In Asia, markets reacted positively to Japan’s election results, with the Nikkei index climbing higher. A weakening yen combined with expansionary fiscal policies boosted regional risk appetite. QCP pointed out that this could also translate into additional liquidity for crypto markets during Asian trading hours.

Long-Term Trend Favors Risk Assets

The report concluded that periods of dollar weakness should be seen as potential buying opportunities for Bitcoin. While short-term volatility may persist due to limited data availability and geopolitical risks, QCP stressed that the broader, long-term trajectory still leans in favor of risk assets — with Bitcoin at the forefront.

*This content does not contain investment advice.

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Reasons for Bitcoin Price Crash 

Firstly, Bitcoin encountered technical resistance. Last week, BTC, which surpassed the high of $105,663, succumbed to heavy selling pressure. This led to a 4.23% price drop. CoinGlass data shows that $84.68 million of liquidations came from short positions, with $50.96 million from shorts. Additionally, Bitcoin’s volatility is at a 10-month low, making investors cautious. A bearish engulfing candlestick erased Sunday’s 3.23% gain. The critical support level stands out at $101,000. The volatility being at a 10-month low is keeping investors cautious. 

QCP Capital believes digital assets have more room for recovery. The expectation is particularly strengthened by Coinbase’s inclusion in the S&P 500 on May 19. Swissblock analysts observed that Bitcoin collected liquidity above the $104,000-$106,000 resistance range but failed to break out of this zone. Swissblock expects a decline if the price fails to hold the $101,500-$102,500 range. Based on historical on-chain volume and transaction data, analysts identify the $97,000-$98,500 range as a significant downside target. 

Altcoin Decline and Future Expectations 

Altcoins show high correlation with Bitcoin. Therefore, BTC’s crash hit ETH, XRP, and DOGE. Ethereum lost 8.76%, XRP 5.31%, and DOGE 9.11% in the last 13 hours. However, the overall outlook remains bullish. Bitcoin targets of $118,000 and $135,000 seem feasible. As a result, the $100,300 to $99,800 range should be watched as a support zone. Investors expect a slowdown in these levels. 

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Bitcoin is facing a tough battle for support, as the bull market has paused due to macroeconomic concerns.

The price of Bitcoin has lost over $12,000 in just two days, and now cryptocurrency investors and analysts are starting to target lower levels.

BTC Price Analysis: $90,000 is Not the “Bottom” Point

Bitcoin dropped to $96,000 on December 19, causing panic among both individual and institutional investors.

According to CoinGlass data, as of December 20, total crypto liquidations in the last 24 hours reached nearly $900 million.

Total Liquidations Chart

According to data from UK-based investment firm Farside Investors, US spot Bitcoin exchange-traded funds (ETFs) experienced their largest net outflow to date, totaling $679 million.

US Spot Bitcoin ETF Netflows

While this drop has, in a way, relieved some excessive speculation, long-term market participants are worried that worse may be ahead.

Among them is X commentator BitQuant, known for his long-term optimistic outlook on Bitcoin, who frequently predicted that Bitcoin would reach $95,000 before breaking its previous all-time high set in March of this year.

In his recent posts, BitQuant stated that it is likely for BTC/USD to make a deeper bottom, and the drop to $90,000 earlier this month was not the bottom.

“Sorry, but no, $90,000 was not the bottom,” he replied to another user who asked about the potential turning point for the market.

In a chart published on December 10, using Elliott Wave Theory, the price of BTC was projected to drop to the mid-$80,000s in the next downturn.

“For those not planning to buy in the next dip, I advise you to step away from the charts and enjoy life until the rocket refuels for the next moon trip,” he added in the accompanying comment to this forecast.

BTC/USD 4 Hour Chart

Lower targets are coming from the on-chain data platform Whalemap.

After the recent drop, the Whalemap team analyzed large accumulation areas by major investors and identified an area of interest that is about 30% below the current spot prices.

“The Onchain Volume Profile shows significant Bitcoin accumulation between $60,000 and $67,000. And a new accumulation range is forming at the current price levels,” they wrote on X.

“For long-term HODLers – the risk-reward ratio is well-defined on a macro scale – a drop below $60,000 is not expected in the near future.”

BTC/USD 4 Hour Chart

Bitcoin and Cryptocurrencies Rank Among “Extremely Vulnerable” Assets

Changes in US macro policies have put a halt to the widespread rally in risk assets, which observers are increasingly finding irrational.

The Federal Reserve triggered this reversal by lowering its rate-cut expectations for 2025, due to rising inflation indicators.

QCP Capital:

“While it is easy to link the wave of selling to the Fed’s hawkish rate cut stance, the fundamental reason for this morning’s crash is the market’s overly optimistic positioning.”

“Since the election, risk assets have experienced a one-sided, impressive rally, which has left the market extremely vulnerable to any shocks.”

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In its statement, QCP Capital highlighted that since Bitcoin’s launch in 2009, three U.S. presidential elections have taken place, and after each election, Bitcoin’s price never returned to the lows seen during the previous election period. The company added, “There’s notable activity in the crypto market. After every U.S. election in Bitcoin’s history, it has reached new highs and has never returned to the previous election’s low. Therefore, we believe this rise will continue as we approach 2025.” QCP Capital emphasized that investors have strong expectations for continued growth.

Meanwhile, the effects of this rise are being observed not only in Bitcoin but also across other actors in the crypto ecosystem. Significant increases have been seen in the stock prices of Bitcoin mining companies, as well as notable gains in the stock values of Tesla and media companies owned by Donald Trump. This phenomenon, referred to as the “Trump trade,” indicates that the Republican presidential candidate’s dominance in the election is directly reflected in the crypto market.

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At the time this report was written, Bitcoin continues to trade at around $73,900. Market analysts and investors have optimistic expectations that this momentum will continue into the new year.

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The report highlights the US presidential debate as a noteworthy event, despite the lack of cryptocurrency-specific discussions. Kamala Harris, who showcased her legal prowess during the debate, received significant backing from pop icon Taylor Swift, further solidifying her influence.

According to Polymarket predictions, Harris now holds a slight edge in the race, with odds of becoming the US’s first female president exceeding 50%.

On the economic front, the Consumer Price Index (CPI) report released on Wednesday met expectations, showing a year-over-year increase of 2.5%. This outcome bolstered the probability of a 25 basis point (bps) interest rate cut to 85%. However, the slightly lower-than-expected Producer Price Index (PPI) data on Thursday introduced some market uncertainty, with investors pricing in a 50/50 chance of either a 25 or 50 bps rate cut.

Following the PPI data, gold prices hit all-time highs as investors sought safe-haven assets.

QCP Capital noted that Bitcoin exchange-traded funds (ETFs) experienced positive inflows on four out of the five trading days this week. Friday alone saw an inflow of $263.2 million, marking a significant contrast to the net outflows of the previous week.

Meanwhile, outflows from the Grayscale Bitcoin Trust (GBTC) slowed, with a $6.7 million inflow recorded on Friday.

MicroStrategy, a business intelligence firm known for its substantial Bitcoin holdings, announced the purchase of an additional 18,300 BTC on Friday, bringing its total holdings to 244,800 BTC.

Bitcoin’s price surged to $60,000 overnight, liquidating approximately $50 million worth of short positions.

Additionally, the options market indicated renewed interest in Ethereum (ETH). Over 20,000 contracts were purchased targeting a price level of $3,000 by December 27th, suggesting growing optimism for a potential ETH rally before year-end.

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“In the lead-up to next week’s U.S. non-farm payroll report, we expect market volatility to continue its downtrend as the market positions itself for potential Fed rate cuts.” QCP Capital analysts stated.

Next week’s U.S. non-farm payrolls and Friday’s GDP figures are expected to give market participants more clarity on the probability and possible scope of a rate decrease at the next Federal Open Market Committee meeting on Sept. 18, claims QCP Capital.

Friday, September 6, will see the release of U.S. non-farm payroll data. The choices of the Federal Reserve on the direction of its interest rate can be influenced by this closely observed indicator. Early August’s previous non-farm payrolls showed an unexpected increase in the U.S. unemployment rate to 4.3% from 4.1%, which caused a global market sell-off due to worries about the Fed lagging in its rate-cutting initiatives.

Though they pointed out that it would probably have a lower impact on the bitcoin market, QCP Capital analysts also underlined the relevance of today’s forthcoming U.S. GDP data on bitcoin’s price performance, especially if it supports the general narrative of a slowing U.S. economy. Although the economy seems to be slowing down, it is yet unknown if a recession is about to strike.

For both bitcoin and ether, the experts noted investors in the derivatives market hedging for possible near-term negative swings. “Risk reversals until October are still skewed towards puts in both bitcoin and Ethereum, indicating that the market remains cautious about the underside,” they stated.

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Analysts are closely watching today’s Jackson Hole meeting, anticipating clues about the Federal Reserve’s monetary policy direction, which could have repercussions for the prices of risk assets like Bitcoin.

QCP Capital noted, “The downward revision of U.S. non-farm payrolls suggests a weakening labor market, raising concerns that the Fed might delay interest rate cuts, which triggered a wave of selling. However, these fears were somewhat alleviated by the July FOMC minutes, which indicated that some policymakers were open to rate reductions, hinting at a more dovish approach balancing inflation and employment targets.”

QCP added, “All eyes are now on Fed Chair Powell’s speech at Jackson Hole. While markets are focused on potential rate cuts, unexpected economic data could have a significant impact. We favor products that capture the upper band of earnings.”

There is an expectation that Powell might signal a move to lower borrowing costs in the coming month. Historically, such actions have been received positively by traders since easier access to capital typically fosters growth in riskier sectors.

Potential for Disappointment

However, some are adopting a more cautious stance.

Augustine Fan, a manager at SOFA, commented, “Risk markets might be setting themselves up for disappointment if Powell seeks to leave some room for maneuver against the four cumulative cuts priced in by the end of the year. Nonetheless, Jackson Hole has traditionally been a ‘risk-positive’ event, so expect traders to be more inclined to buy on dips.”

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Bitcoin (BTC) fell below $54,000 after the declines it experienced in recent weeks, but this week the price has been more stable.

At this point, Bitcoin has experienced a steady recovery to the $58,000 level, while Ethereum (ETH) has moved towards the $3,100 level.

QCP Capital analysts, who examined the reasons behind this recovery, said that positive US inflation data, inflows into spot ETFs, and the completion of sales by the German government were behind this recovery.

He said that while these declines were taking place and retail investors were panicking, large institutional investors were focusing on the long-term rise rather than short-term declines.

At this point, analysts stated that institutional investors are focusing on expectations of $100,000 and $120,000 in Bitcoin in December and March, respectively, and are aggressively buying call options at these prices.

“Some stability has come to the market this week and BTC and ETH have made a steady recovery towards 58k and 3100.

What caused this relief rally?

Positive macroeconomic sentiment with slowing inflation. The market is currently pricing in a 95% probability for a rate cut in September.

The German government has completed the sale of 50k BTC and the spot BTC price held well in the face of heavy selling over the past week.

Strong demand from spot ETFs with net inflows of around $1 billion this week.

While crypto twitter and retail sentiment are screaming panic, big hedge funds are buying BTC confidently and aggressively from the top, especially December and March calls targeting the 100k-120k price level.”

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Option Market Sentiment Remains Bullish

Despite the recent sell-offs, QCP Capital noted that the options market still retains a bullish bias, indicating that the market is still anticipating a year-end rally. This aligns with the observation of significant buying interest in 100k-120k long-term options by options traders.

QCP Capital Anticipates Stagnant Third Quarter Due to Mt. Gox Uncertainties

Looking ahead, QCP Capital analysts predict a stagnant third quarter for BTC due to uncertainties surrounding the potential release of Bitcoin from the Mt. Gox bankruptcy estate. They believe that the market will remain cautious until the Mt. Gox situation is resolved.

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Bitcoin’s price has already shown signs of recovery, bouncing back from its recent dip below the $60,000 support level to reclaim the $63,000 mark. This positive momentum is further fueled by rising spot BTC ETF inflows, which reached a two-week high of $73 million last Friday.

QCP Capital analysts echo the optimistic sentiment, highlighting Bitcoin’s historical tendency to perform well in July. The asset has averaged a 9.6% return during this month, particularly after experiencing a negative June. This seasonal trend, coupled with the upcoming ETH spot ETF launch, is fueling investor expectations for a bullish July.

Despite the overall bullish outlook, Bitcoin’s price has experienced a slight dip in response to the German government’s Bitcoin sale. As of writing, BTC is trading at $62,826, while Ethereum remains at $3,482.

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