The trading firm QCP Capital released a new report analyzing the impact of fresh inflation data in the U.S. on cryptocurrency markets and providing a forecast of events leading up to the Fed's September meeting.
Inflation cooled more than expected
The core Consumer Price Index (CPI) in the U.S. was 2.7% compared to the expected 2.8%, while the key CPI indicator was recorded at 3.1% instead of the anticipated 3.0%. Softer data on core inflation strengthened the positions of advocates for the start of a monetary policy easing cycle by the Fed as early as September — most market participants are now set on a 25 basis point rate cut.
The inflation of goods, which was expected to 'heat up' due to companies passing increased costs onto consumers, turned out to be lower than forecasts. The market is still pricing in about 60 basis points of rate cuts in 2025, while the terminal rate remains stable despite the weakening labor market.
Ethereum is gaining momentum ahead of historical highs
Long-term holders of Ethereum finally feel euphoria — the coin's price is approaching historical highs. Capital raised by Bitmine to create a reserve has attracted market attention. Analysts at QCP Capital note that any investments in Ethereum have a more noticeable impact compared to Bitcoin due to lower capitalization and relatively thin liquidity.
The QCP team expects the current momentum of Ethereum to continue as long as fresh funds keep flowing into Ethereum ETFs. The firm links Ethereum's growth to an overall improvement in market sentiment following the removal of key risks.
Stocks are hitting new highs amid geopolitical easing
After the removal of several key risk events, stock markets continued to rally to new historical highs. A 90-day extension of the TACO agreement was announced in the trade standoff between the U.S. and China. Geopolitical tensions between Ukraine and Russia have decreased — escalation is now seen as a distant possibility, while the baseline scenario has become a ceasefire or peace agreement.
Jackson Hole in focus
The next key point will be the economic symposium in Jackson Hole on August 21, where QCP Capital expects signals from Fed officials regarding readiness for a September rate cut of 25 basis points. Before the September meeting of the Federal Open Market Committee, only one CPI report and one labor market report (NFP) will be released, and analysts believe that these data are unlikely to significantly affect the regulator's decision.
Futures positioning shows that investors see 3% as the lower bound for the Fed's rate in 2026. Market expectations for rate cuts in 2025 remained unchanged after the release of inflation data.
The combination of cooling inflation and growing risk appetite creates a favorable environment for cryptocurrency growth. Ethereum particularly benefits from this configuration due to the structural features of the market and the increasing influx of capital.
