QCP Capital: Crypto Assets May Become New Focus of Money Flows as Stock Market Rally Weakens

On October 8, QCP Capital's latest analysis pointed out that the MSCI Asia Pacific Equity Index recorded its biggest one-day drop in nearly a month, driven by the failure of Chinese stocks to extend their rebound after the long holiday. On the US stock market front, it also trended lower in overnight trading, mainly driven by weakness in large tech stocks and rising geopolitical risks, with the panic index VIX rising to 22 points.

Notably, cryptocurrency market volatility remained relatively stable, with recent implied volatility at 43%, 3 percentage points below 7-day historical actual volatility. This follows a Bloomberg report suggesting that Chinese investors may have been selling USDT to fund equity investments since the end of September, while the price of Bitcoin has remained relatively stable over the same period. As the rally in Chinese equities fades, analysts anticipate that funds may be flowing back into the cryptocurrency market, a trend that reflects crypto's growing market position as an alternative risk asset.

QCP analysts believe that equities could face downward pressure in the near term given the upcoming earnings season and inflation data releases, which could pose a challenge to current high valuations. Meanwhile, ongoing geopolitical tensions have further increased market uncertainty. Nonetheless, QCP remains cautiously optimistic about the market in the medium term and expects US election-related news to continue to be a key driver of the cryptocurrency market. For example, Tesla CEO Elon Musk recently commented on the prediction market Polymarket that the platform was more accurate in predicting Trump's lead over Harris than traditional polls.