Crypto markets rebound after BoJ downplays rate hike – but Ether?

Crypto markets are bouncing back after the Bank of Japan’s deputy governor downplayed the chances of another rate hike anytime soon. This has given the market a much-needed boost.

But guess who’s not joining the party? Yep, it’s Ether. Despite the overall market recovery, ETH is still lagging behind. 

According to analysts from QCP Capital, the recent comments from the BoJ have had a positive impact on the crypto market. But there’s a potential ceiling on the near-term gains, especially for ETH. 

Jump Trading is still offloading its ETH holdings, with about 21,394 $wstETH, which is roughly $63.6 million, left to be sold. 

Plus, the infamous Plus Token Ponzi scheme is also on the move, transferring 25,757 ETH, worth $63.1 million, in the last 30 hours. These actions are putting a damper on ETH’s price movement.

Bitcoin stays strong

But Bitcoin (BTC) is showing resilience. QCP Capital is bullish on BTC, because of the huge call buying for December and March expiries. 

Major funds are also rolling over their long call positions from September. In a trade idea floated by the analysts, there’s a way to receive a weekly 23% per annum coupon while BTC keeps recovering throughout the summer. 

The downside protection plan involves buying BTC at 21% lower from the current spot price of $45,000, but only if the price dips below $40,000 at expiry.

Right now, the BTC spot price is over $59,000, making this trade idea quite appealing for those bullish on BTC in the long-term.

Economic uncertainty hurts crypto

The fear of a global recession is looming large. Central banks have been busy with rate cuts, 35 in the last three months alone, exceeding early 2024 levels. 

This is reminiscent of the 2008 financial crisis when central banks executed 76 rate cuts at the peak.

Several factors are fueling these recession fears. Economic growth projections for 2024 are looking bleak, with the IMF forecasting a slight decline to 2.9%, down from 3% in 2023. 

Despite some improvements in the inflation outlook, the slow growth and persistent inflationary pressures are pushing central banks to take action to avoid a deeper downturn.

Debt maturities in the US are adding to the stress. The substantial amount of speculative-grade debt maturing in 2024, coupled with falling bond yields, indicates a stressed financial environment.

Investors are flocking to safer assets, and the decline in yields is a classic sign of a lack of confidence in sustained economic growth.

Bitfinex analysts believe that the fear of an economic recession could have mixed effects on the crypto market. Bitcoin might benefit from its safe-haven appeal during economic uncertainty. 

Investors often turn to assets perceived as stores of value, and so Bitcoin could see increased demand as traditional markets face volatility.

But the broader crypto market, particularly altcoins, might not fare as well. Decreased liquidity and a drop in risk appetite could hurt smaller cryptocurrencies. 

Investors may become more risk-averse, pulling funds from high-risk assets like smaller cryptocurrencies into safer investments.

Aurelie Barthere, Principal Research Analyst at Nansen, predicts a 40% probability of a recession in the second half of 2024, with a 30% chance of a shallow recession and a 10% chance of a hard landing. 

This is way above the historical average of 17%, isn’t it?