As the final quarter of 2023 kicks off, the cryptocurrency market has shown remarkable growth, particularly Bitcoin (BTC), which surged 15% in the last two weeks and 9% in the past three days alone. This uptick follows a disappointing third quarter, where BTC dipped by 12%, ending the Supermoon cycle last week at a low of 26,500, down from a high of 31,500 at the cycle’s start on 4 July.

While many are optimistic that this could be the beginning of a much-anticipated Q4 rally—especially given that October has historically been a strong month for BTC—QCP Capital, a full-suite crypto asset trading firm, remains skeptical.

In an article published earlier today, the firm outlines four primary reasons for their caution:

  1. Exogenous Factors Fueling the Rally: The recent surge in BTC prices is largely attributed to external elements. Initial enthusiasm was sparked by the impending U.S. Securities and Exchange Commission (SEC) approvals for the first Ethereum (ETH) futures Exchange-Traded Funds (ETFs). This was followed by lower-than-expected core PCE inflation figures and a last-minute Continuing Resolution (CR) deal that will keep the U.S. government operational until 17 November.
  2. The ETF Effect: Drawing parallels with the launch of BTC futures ETFs two years ago, QCP Capital notes that such events can create short-lived highs. In the case of BTC, the price peaked at 69,000 roughly 25 days after SEC approval for its futures ETF. The firm argues that futures ETFs can dilute the spot market by introducing synthetic coins without affecting the actual supply.
  3. Government Shutdown Scenarios: While the CR deal may seem like a positive development in the short term, it could be detrimental in the medium term. QCP Capital suggests that a government shutdown might have been more favorable for the markets, citing historical data that shows the S&P 500 trading positively during each of the five government shutdowns since 1995.
  4. Influence of Real Yields and Gold: According to QCP Capital, real yields and gold are the true market indicators to watch. If the CR deal triggers an upward movement in real yields, risk markets could face significant downside pressure. A break of 14,500 in the Nasdaq or 4,250 in the S&P 500 could be a trend that BTC cannot afford to ignore.

In light of these factors, QCP Capital is using the current rally as an opportunity to purchase downside hedges. They anticipate that the BTC price will face resistance at the 29-30k level and suggest that the current low volatility offers a cost-effective option for preparing for any sharp downward reversals.

Featured Image via Midjourney