QCP Capital cites optimistic crypto indicators, despite limited market sell-off

Despite an escalation in geopolitical tensions in the Middle East on Tuesday, which triggered a "shallow" sell-off in risk assets, underlying market sentiment remains positive, QCP Capital analysts said, asserting that "Middle East geopolitics could steal the limelight for now, but the shallow sell-off after the intensification of the conflict suggests that the market remains well bid for risk assets, and this minor setback shouldn't distract from the bigger picture."

In their report released Wednesday, QCP Capital noted that the risk-off reaction in traditional finance assets following Iran's missile attack on Israel was limited, with the S&P closing just 1% lower and U.S. benchmark West Texas Intermediate oil prices rising by 2%. Bitcoin BTC -4.06% fell around 5% but found support around the $60,000 mark. "However, further escalation could push bitcoin much lower, possibly to the $55,000 level," the QCP Capital analysts added.

The analysts drew parallels between current policy actions in China and Japan's economic strategies in the 1990s when, to combat deflation, the Bank of Japan implemented rate cuts, introduced negative interest rates and started the then-novel quantitative easing program.

The analysts at QCP Capital indicated that China's recent economic stimulus measures could positively impact risk assets, including cryptocurrencies. "The flush of liquidity from the People's Bank of China and potential fiscal support will likely support asset prices in China, with bullish sentiment potentially spilling over globally to support risk assets, including crypto," they added.

Dovish tones from Fed Chair Powell

Furthermore, the analysts highlighted recent dovish comments made by U.S. Federal Reserve Chair Jerome Powell at the National Association for Business Economics on Monday, indicating support for more potential rate cuts in 2024. "We anticipate that asset prices will remain supported as both the U.S. Federal Reserve and the PBoC enter a more aggressive cutting cycle," they said.

Bitcoin’s price decreased by around 4% in the past 24 hours and is currently sitting at around $60,900 at 8:18 a.m. ET, according to The Block’s Bitcoin Price Page .

In the UK, Shell, BP and BAE Systems led the FTSE 100 risers this morning — contributing to a modest gain of 0.05% for the London-based index. Analysts predict potential disruptions to oil supply, resulting in a rise of around 2.5% for Brent crude futures, the international oil benchmark.

Global markets showed mixed results. Japan’s Nikkei 225 fell by 2%, the Stoxx Europe 600 edged up and Hong Kong’s Hang Seng Index increased by over 6%. Mainland Chinese markets remained closed for a holiday. Meanwhile, U.S. stock futures declined as escalating tensions in the Middle East, coupled with anticipation of a possible Israeli response to Iran's rocket attack, prompted a cautious stance among investors.