The analytics company QCP has released a detailed report discussing the current state of Bitcoin and the overall cryptocurrency market. The report specifically points out significant economic indicators and policy decisions that could have a substantial impact on the market.

To start, the report highlights concerning data from the United States. The GDP of the USA only grew by 1.6% in the first quarter of 2024 compared to the previous quarter, falling short of the expected 2.5%. Additionally, Core Personal Consumption Expenditures were at 2.8% annually, exceeding the forecast of 2.6%, while Personal Consumption Expenditures were at 2.7% annually, higher than the expected 2.6%.

QCP notes that these figures suggest a stagnant economy and an ongoing inflation issue that is worrying the FED. If GDP continues to decline and inflation remains stubborn, the US might face a stagflation scenario of negative GDP growth and high inflation. Nevertheless, according to QCP, this scenario has not materialized yet.

Taking this data into account, the markets are currently anticipating a single interest rate cut in 2024. This is a significant shift from the beginning of the year, where seven rate cuts were expected, and three were forecasted for March.

The report then delves into fiscal policy, highlighting its role in driving liquidity and asset performance. With the US Treasury General Account (TGA) holding nearly US$1 trillion, QCP believes that the US Government might opt to spend these funds in the NPL, injecting around $1 trillion into the financial system. This outcome is likely considering the upcoming US elections.

Moreover, the Quarterly Refunding Announcement (QRA) scheduled for May 1 might witness increased issuance in short-term US bonds. QCP draws parallels to previous actions by Yellen in October 2023, where the QRA influenced short-term interest rates, leading to a peak in second-half bond yields at 5.2% and a subsequent surge in stocks. Analysts predict a similar move this time around.

The report suggests a potential injection of $1.4 trillion in liquidity between the US Treasury General Account (TGA) and the Reverse Repo Fund. This injection could be a significant driving force behind the market rise towards the end of the year.

(Note: The contents are informational and not investment advice.)