QCP Capital says liquidity moves crypto markets

QCP Capital says liquidity moves crypto markets

According to QCP (a crypto asset trading firm), crypto owes the global liquidity cycle some credit. This year has started quite well for crypto compared to 2022 when we had one of the most extensive crypto winters.

The crypto market prediction for the year

There are multiple bullish predictions for the crypto market this year, with some investors optimistic about the upcoming activities. However, QCP Capital released ‘The Crypto Circular #9’, which features ‘The Frightful Fours’ and ‘Upcoming Risk Events’ on Jan. 19.

The circular expounds on the Frightful Fours, stating that the number ‘4’ is unlucky in the Eastern world. Additionally, wave 4s are risky and unpredictable in the markets. Therefore, the analysts believe the bounce since Nov. 2022 lows are just a wave 4 correction, and there is still a wave 5 selloff to come.

They also believe that the current bullish move in the crypto market is just an extension of the bounce. 

The Frightful Fours

  • Wave 4; according to the Eliot Wave guideline, wave 4 most often retraces more than 20% of wave 3, very often retraces about 38.2% of wave 3, and rarely retraces wave 3 by more than 50%.
  • Pivot Hopes; the Oct. 2022 low saw the Fed get hawkish. However, the markets are fighting the Fed, believing it will not carry the 2023 forecasts. The confidence comes from the rapid softening of the actual CPI and the recession in December 2022. 
  • FOMC Ire; analysts expect the updated rate forecasts to be released by March 22 and predict a rude market shock if the median 2023 is not adjusted. The FOMC’s ire may rise due to the loosened financial conditions. Coupled with the rally of meme stocks and crypto, they will severely derail the fight against inflation.
  • Liquidity Rules; there is no certainty of a bull market. Many crypto institutions that need liquidating assets buy time by preserving cash and cutting expenses. If the liquidity cycle turns negative, the start of wave 5 for macro markets is expected to come up. 
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