- With some idiosyncratic crypto catalysts ahead, macroeconomic events should have a big influence on prices in the near term.
- The macroeconomic situation appears to be improving in the United States and the Middle East.
- Cryptocurrency traders will likely be keeping a close eye on inflation on Wednesday.
Cryptocurrency investors should not hesitate to buy on the dip.
That’s according to Quinn Thompson, founder of hedge fund Lekker Capital, a firm that specializes in using macroeconomic analysis to invest in cryptocurrencies.
“Find a way to remove the emotion and position yourself for what the market is going to care about next month (Fed liquidity), not last month (recession/growth fear),” Thompson posted on X.
“The market is a little asleep at the controls here,” he added.
Inflation and the Fed
Monday’s bloodbath was partly sparked by fears that the Federal Reserve had kept financial conditions too tight for too long and that the United States was on the verge of entering a recession.
That means Wednesday’s consumer price index report should be in the spotlight this week, according to Coinbase analysts David Duong and David Han.
Investors will be looking for signs of slowing inflation, which would further confirm that the Federal Reserve is finally ready to cut rates.
“Given the lack of idiosyncratic catalysts for crypto in the coming weeks, we believe macro dominance could continue,” Coinbase’s report said.
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By keeping interest rates high, the US central bank is encouraging investors to buy government bonds to obtain a solid, risk-free return.
However, when interest rates are lower, investors tend to seek returns in risky assets, such as Bitcoin and technology stocks.
Investors see a 100% chance that the Federal Reserve will cut rates in September, according to FedWatch data, with a 45% chance of an aggressive 0.5% cut.
“We’re in an environment of slowing growth and tight monetary policy, which is a major headwind,” Thompson said.
“I don’t expect we’ll see further weakness” as the financial environment evolves, he added.
Middle East Conflict
Thompson also dismissed fears of an escalation of the Middle East conflict.
“There seems to be some hesitation to buy back silver in anticipation of a potential war” between Israel and Iran, he said. “The problem with that view is that it’s a consensus view and it’s a headline view.”
Thompson argued that Iran would prefer Vice President Kamala Harris to win the election this year rather than former President Donald Trump – since the latter reimposed sanctions on Iran while in office.
“Launching a full-scale war and driving up oil prices is not in their interest,” Thompson said.
Tom Carreras is a markets correspondent at DL News. Got tips on crypto and macroeconomics? Contact us at tcarreras@dlnews.com
