Key facts:
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The market will be waiting for the Fed’s announcements in mid-September.
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For Coinbase, rate cuts are not a direct catalyst for the price of Bitcoin.
Bitcoin (BTC) has been experiencing moments of high volatility in the face of various macroeconomic data, so it seems crucial for the market to follow its development.
At the beginning of the month, recession risks in the United States sparked by weaker-than-expected employment data, led to the digital currency falling. And, last week, It rose in the face of a conference by Jerome Powellchairman of the Federal Reserve (Fed), in which he stated that it is time to tighten monetary policy and strengthen the labor market.
The price movement can be observed in the following chart:
This price action comes as bitcoin’s adjusted spot volumes have been around $10 billion per day in August. That’s double the average for the same month over the previous five years, according to a recent report. investigation from the Coinbase exchange.
Bitcoin (BTC) and Ether (ETH) volatility in August over the past few years. Source: Coinbase.
“Market concerns about a cooling labor market leave us very data-dependent at the moment,” the exchange comments. “The lack of crypto-specific narratives makes this asset class heavily reliant on macroeconomic factors to drive performance,” it adds.
With this scenario, Coinbase believes that Investors are waiting for the Federal Reserve to act“We do not believe that market players will deploy capital until after the meeting on September 17 and 18,” he said. That is when the next decision on the interest ratesas reported by CriptoNoticias.
According to Coinbase, what is relevant now is not the cuts, but their speed and intensity
With inflation supposedly under control at around 3% and the labor market cooling, Powell’s new message raises expectations of rate cuts starting in September. For more than a year, rates have been at their highest in two decades to calm inflation, so a cut would encourage demand for risky assets.
However, for the exchange, rate cuts are not a market catalyst per se, because they can be quite discounted. “The direction of travel for the Fed is clearly a looser monetary policy,” he clarifies. For this reason, he assures that The relevant question is, rather, the speed and intensity of the transition..
He also stresses that context matters. He says that if the cuts are the result of good inflation management and healthy economic activity, markets will interpret them constructively. On the other hand, if the Fed is too late to prevent an economic slowdown or recession, he sees possible harmful effects on prices.
“This gives added importance to the release of nonfarm payrolls (NFP) for August, scheduled for September 6,” he said. This report measures the monthly change in the number of people employed in all nonfarm businesses, so it will provide signals about the employment situation.
Employment is a key indicator of economic health. When businesses hire fewer or lay off workers, it reflects a potential decline in demand for goods and services, which can lead to an economic contraction. It is therefore crucial to identify a potential recession if it worsens.
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