Although there have been tailwinds recently, the crypto market is showing bullish momentum. Ethereum leads this recovery. With a profit of 35% in the last week, $1600 is now the second-largest crypto market by market capital.
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QCP Capital is a trading firm shared a market update claiming the current bullish price action has been a “pleasant surprise for all”. This price movement began on the heels of the U.S. Consumer Price Index’s (CPI) latest print. CPI is a metric used for measuring inflation.
CPI is at its highest level in 40 years, which would have an adverse impact on crypto markets. According to the trading company, this is because market participants expected lower inflation over the next months.
The potential fall in inflation may give risk assets some breathing room and allow them to rally, which could persuade U.S. Federal Reserve from denying a 100-basis points (bps) increase in interest rates. QCP Capital will release its decision July 27. QCP Capital announced:
A 20% chance of 100bps being offered is available, but we believe 75bps will suffice. As 100 bps becomes fully priced in, expect another boost.
Ethereum is leading the relief because there is more clarity around the upcoming “Merge”, an event set to combine this network’s execution layer with its consensus layer. Thus, consolidating Ethereum’s migration to a Proof-of-Stake (PoS) consensus protocol.
“The Merge” has been tentatively scheduled for September which has contributed to the shift in the general sentiment across the crypto market and supported this rally. The bullish price action, QCP Capital said, has been “keenly felt in the options market”.
The sector saw a “rush” to purchase buy contracts (calls) for the September expiry. In other words, options traders are bullish on the potential impact that “The Merge” will have on Ethereum.
Ethereum: Can it extend its current rally?
However, options markets suggest that Ethereum may soon exhaustion. QCP Capital records an increase in calls selling for ETH’s price and believes insolvencies announcements from other companies could operate as tailwinds for the second crypto by market cap.
Numerous companies are negatively impacted by part of the contagion caused by Three Arrows Capital’s default. The crypto hedge fund failed to pay billions in loans from its counterparties. It includes Voyager, Celsius, Voyager and Genesis.
Companies have had to suspend operations on certain levels. New companies announced that 3AC was affecting them almost every other week. Yesterday’s withdrawals were stopped by crypto exchange Zipmex. There are growing rumors of other companies adopting similar steps.
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QCP Capital stated:
The markets were optimistic but it is possible that the market will still be affected by the credit contagion. We are adding to our negative skew and keeping slightly longer gamma/vega (longer-term options).