Market is Positioning for an "Upside Surprise," QCP Says

Ruholamin Haqshanas

Last updated:

June 12, 2024 10:51 EDT | 2 min read

QCP Capital has expressed optimism regarding market sentiment, citing several factors that indicate a potentially bullish outlook for the market.

In a recent note, QCP pointed out that BTC futures swap points experienced a bounce off their recent lows of 10% and rallied yesterday.

This suggests that traders have been taking profits on their basis trades by closing their short futures positions.

With the right catalyst, there is a strong possibility that yields could be pushed higher, surpassing the 15% mark.

Traders Buy Call Options

Another promising sign noted by QCP is the aggressive buying of 13-Jun calls observed today, coupled with a substantial increase in the funding rate.

This indicates that the market is positioning itself for what QCP refers to as an “upside surprise.”

It suggests that market participants are anticipating a positive development that could lead to a significant upward movement in prices.

With equity markets consistently reaching record highs for the second consecutive closing, QCP believes that an inline CPI (Consumer Price Index) print and a neutral outcome from the FOMC meeting could serve as catalysts to propel the crypto market to retest its previous highs.

QCP: We saw aggressive buying of 13-Jun calls today, coupled with a substantial increase in funding rate, indicating the market is positioning for an upside surprise. An inline CPI print and neutral FOMC outcome could propel the crypto market to retest its highs once more.…

— Wu Blockchain (@WuBlockchain) June 12, 2024

In light of this structurally bullish environment, QCP presents a trade idea centered around ERKOs (Exotic Return Knockout options).

They highlight the BTC 28-Jun Call ERKO as an attractive opportunity with a favorable risk-to-reward ratio and minimal cash outlay.

This particular ERKO has a strike price of 68k and a knockout level at 75k. If the BTC spot price remains just below 75k at expiry, there is a potential max payout of 5.6 times the initial investment.

The cost per BTC for this ERKO is $1,250, with the spot reference at 67,800.

Bitcoin Rises After CPI Results

The U.S. CPI for May surprised economists by remaining flat, surpassing expectations for a 0.1% increase and marking a decline from April’s 0.3% growth.

On a year-over-year basis, CPI rose by 3.3%, slightly lower than both analyst forecasts and the previous month’s reading of 3.4%.

The core CPI, which excludes food and energy costs, experienced a 0.2% increase in May, outperforming expectations for a 0.3% rise and surpassing April’s 0.3% growth.

Year-over-year, the core CPI rose by 3.4%, slightly below expectations for 3.5% and April’s reading of 3.6%.

Bitcoin responded positively to the lower-than-expected inflation figures, surging to $69,400, a nearly 4% increase over the past 24 hours.

The soft inflation data is seen as favorable for Bitcoin and comes after concerns about rising inflation had previously contributed to a decline in BTC prices.

Traders had anticipated multiple interest rate cuts by the end of the year, but those expectations have diminished in light of the recent CPI report.

The CME FedWatch Tool revealed that market participants now anticipate only one or two rate cuts, with the first not projected to occur until September.

The cryptocurrency market has shown heightened sensitivity to U.S. economic data, with recent inflation figures impacting Bitcoin prices.

The hotter-than-expected inflation readings and reduced hopes for rate cuts led to a decline in Bitcoin’s value from its all-time high of over $73,000 in March to below $57,000 in May.

Traders are now looking for looser monetary conditions to fuel the next leg of the crypto rally towards record prices.

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