Bitcoin's recent price bounce — up more than 5% over the last week — is largely due to rumors of a delay for Mt. Gox repayments into 2024, according to trading firm QCP Capital. However, the firm still targets the $22,000 level for bitcoin in October.
The deadline for creditors of Mt. Gox, which collapsed in 2014, to provide their repayment information passed in April — opening the window for repayments to be carried out by Oct. 31. However, the deadline for repayments could be subject to change, the Mt. Gox trustee said at the time. Mt. Gox is set to distribute an unknown portion of the 142,000 BTC ($3.9 billion), 143,000 BCH ($31.3 million) and 69 billion Japanese yen ($467 million) that it holds.
"A large reason we're seeing for this bounce are rumors of a Mt. Gox delay to 2024," QCP said in its latest market update. "With the prior expected date just a month away, we believe many went short on this, and an official announcement will surely drive a short squeeze identical to the release of the SEC vs. GBTC judgment last month."
However, the crypto trading firm expects the bounce to be short-lived, with any spike to fade quickly as global risks weigh on the crypto markets into Q4, in line with its $22,000 target.
"The current Wave 2 of our C Wave expanded flat has so far bounced which we expected, but we still need to see the crucial Wave 3 that breaks the local lows for our count to be intact," QCP said. "The invalidation point would likely be a break of prior highs above $32,000."
Global risks weigh on crypto markets
Coming into another FOMC interest rate decision week, the S&P 500's volatility index (VIX) has marked its longest streak of trading under 19 since 2020, QCP said. This eerily mirrors the 2020 scenario, QCP argues, which culminated in the record volatility spike due to the Covid crash.
While the market remains speculative about another potential volatility squeeze, it's unlikely that the upcoming FOMC meeting will be the trigger, with another pause widely anticipated. The FOMC's appetite for further rate hikes this year also seems minimal, according to QCP.
However, "At the same time, we do not see how Powell can assuredly call an end to this hiking cycle, given the surging pump prices and rebounding inflation," the crypto trading firm added, expecting higher for longer rates (no cuts) next year.
A potential U.S. government shutdown at the end of September, with funding for the federal government set to run out unless action is taken by Congress, and rising oil prices all fuel the tail risks, QCP said. It claimed that the Fed was unlikely to act on suppressing volatility this time.
"In such a scenario without Fed easing, equities will likely be down, taking bitcoin down along with it until the Fed acts," the firm added.
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