Analytics Firm Examines This Week’s Cryptocurrency Rally, Shares What to Watch for in the New Week

QCP Capital reported a notable rally in risk assets this week, driven by the People’s Bank of China’s (PBoC) stimulus efforts aimed at reviving the Chinese economy.

This comes on the heels of the US Federal Reserve's decision to cut interest rates by 50 basis points (bps), setting a positive tone for global financial markets.

In Japan, political developments have further complicated the financial landscape. Shigeru Ishiba, known for his criticism of the Bank of Japan’s (BOJ) overly loose monetary policies, is on track to become the country’s next Prime Minister. This political shift has led to market speculation that the BOJ could move away from its historically low interest rate stance.

The Fed’s preferred inflation measure, the Core Personal Consumption Expenditures (PCE) index, rose less than expected at 2.6% on an annual basis, compared with a 2.7% increase expected. This data has fueled speculation about the Fed’s next move, with market expectations suggesting a 53% chance of a 50 basis point rate cut at the upcoming Federal Open Market Committee (FOMC) meeting, and a 47% chance of a 25 basis point cut. In contrast, the Dow Jones Industrial Average gained 137.89 points, closing at a record high.

Next week, attention will shift to U.S. labor market data, including the Job Openings and Labor Turnover Survey (JOLTS), ADP employment data, and the U.S. unemployment rate. Strong results in these areas could support another 50 basis point rate cut in November, further supporting risk assets.

On the crypto front, Bitcoin (BTC) ETFs saw significant inflows, closing the week with $494.4 million in new investments. Ethereum (ETH) ETFs, which saw weaker inflows, gained momentum and closed with $58.7 million. BTC reclaimed the $66,000 level, while ETH traded around $2,700. Implied volatility for ETH remains high compared to BTC, with the ETH/BTC pair holding steady above the 0.04 level.

*This is not investment advice.