Fed Rate Cut Hopes Rise: Bitcoin Price Doesn’t Follow
Weak US jobs data increased hopes for Fed rate cuts, but Bitcoin's price struggled to sustain a rally amid significant spot ETF outflows and a cooling market.
Welcome to the Asia Pacific Morning Brief—your essential digest of overnight crypto developments shaping regional markets and global sentiment. Monday’s edition is last week’s wrap-up and this week’s forecast, brought to you by Paul Kim. Grab a green tea and watch this space.
Expectations for three interest rate cuts this year have returned to the market following a weakening US jobs report. Major US stock indices rallied, but Bitcoin’s price saw a relatively muted response.
Jobs Report Worsens, Fuels Rate Cut Bets
Last week, Bitcoin (BTC) climbed 2.72% and Solana (SOL) rose 2.64%. However, Ethereum (ETH) underperformed, dropping 2.07% over the same period.
Last week’s most closely watched event in the risk asset market was the Friday release of the US August non-farm payrolls (NFP) report. This key indicator can significantly influence US interest rates and overall market liquidity.
Earlier, a surprisingly low NFP number of just 73,000 new jobs in July sparked fears of an economic crisis. These concerns prompted US Treasury Secretary Scott Bessent to suggest a 100 basis point rate cut this year, which helped propel Bitcoin to a new all-time high of $123,000.
The August data proved weaker than July’s, with only 22,000 non-farm jobs added. Furthermore, a revision of the June data revealed a loss of 13,000 jobs, marking the worst performance since 2021.
The unemployment rate also ticked up 0.1% to 4.3% from the previous month. While 4.3% is not a crisis level by historical standards, the dramatic slowdown in job growth is a concern. This suggests that the labor market could be at a turning point and may deteriorate rapidly.
According to the FedWatch Tool, the probability of three Fed rate cuts this year increased once again in response to the poor numbers. Bitcoin’s price quickly rebounded to the $113,000 level.
However, Bitcoin failed to hold onto its gains. A downturn in AI-related stocks led to a drop in the Nasdaq, which dragged Bitcoin’s price back down to the low $110,000s. There was also a wave of disappointment after Strategy(MSTR) failed to be included in the S&P 500 index.
The US spot ETF market, which has previously supported Bitcoin’s price during periods of uncertainty, also showed a weak response. On Friday, about $160.1 million flowed out of the BTC spot ETF market, with BlackRock’s IBIT seeing a $63.2 million outflow—its first in 10 days.
Ethereum’s Struggles Highlight Market Weakness
Ethereum’s situation is even worse. The weekly price trend shows it’s facing increasing downward pressure. Its biggest growth engine, the spot ETF market, saw over $780 million in net outflows last week alone, including a massive $446.71 million on Friday when the US jobs report was released.
Ethereum’s price has been somewhat resilient, likely due to continued buying from Digital Asset Treasury (DAT) companies. Public companies with extensive ETH holdings, such as Bitmine (152,300 ETH), SharpLink Gaming (39,000 ETH), and The Ether Machine (150,000 ETH), have continued to accumulate.
Ultimately, US jobs data has worsened, and rate-cut expectations have grown. Nevertheless, cryptocurrency prices have failed to see a significant or sustained rally.
While major altcoins, excluding ETH, have shown a relatively strong rebound, their gains could be limited if Bitcoin’s price fails to hold. This makes the direction of the market this week crucial.
Will the August CPI and PPI spark a BTC rally?
The US will release two key inflation reports this week: the Producer Price Index (PPI) and the Consumer Price Index (CPI).
August’s PPI, to be released on Wednesday, is expected to rise 0.3% month-over-month. Last month, a higher-than-expected PPI reading of 0.9% cooled rate-cut expectations and was a key reason Bitcoin’s price fell from the $120,000s to the low $110,000s.
Economists expect the CPI to increase 2.9% year-over-year on Thursday. Core CPI should rise 3.1%, a slight uptick from last month’s numbers. Weekly jobless claims due on Thursday are another indicator to watch.
If these inflation figures do not significantly exceed expectations, rate-cut hopes will grow even stronger. A rally in US risk assets could provide the needed momentum for Bitcoin and Ethereum. Here’s hoping investors have a profitable week.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
US CPI Heats Up Across the Board, Triggering "Inflation Spiral" Alert; October Rate Hike Odds Once Hit 50%. "New Fed News Agency": Watch Waller's Speech This Week
After the CPI was released, the market-implied rate hike probability first rose to 50% before falling back to 40%. Wall Street generally believes that whether action will be taken in October still depends on how the Federal Reserve assesses inflation trends. "The New Fed News Agency" noted that, unlike in August when price increases were concentrated in certain items, the stronger-than-expected performance of September's core CPI was more broad-based, further reinforcing the case for a December rate hike. The speech by Waller on Friday morning Beijing time is his last public statement before the Fed's blackout period ahead of this month's meeting. Economists are warning about an "inflation spiral," with real purchasing power and midterm election pressures interweaving.
The calm period in the US stock market is over! The S&P 500 ends its record of 53 consecutive trading days without a drop of over 1%. AI stock sell-off intensifies market concerns.
The S&P 500 Index fell by 1.1%, ending a streak of 53 consecutive trading days without a drop of 1% or more. This was the longest period of calm since January 2020.
Federal Reserve Beige Book: U.S. economy expands moderately but inflationary pressures intensify; AI boosts productivity curbing some corporate hiring demand
The latest Beige Book released by the Federal Reserve on Wednesday shows that overall economic activity in the United States continues to grow, but performance varies across regions. Consumer spending remains generally weak, and there has been little change in the labor market.
Overnight US Stocks | September Inflation Remains High, Major Indexes Decline, Coreweave (CRWV.US) Drops Over 15%
At the close, the Dow Jones Industrial Average fell by 47.96 points, or 0.09%, to 51,622.14 points; the S&P 500 Index dropped by 85.95 points, or 1.10%, to 7,719.50 points; and the Nasdaq Composite Index declined by 511.51 points, or 1.88%, to 26,692.87 points.
Crypto prices
More
