On Wednesday, the minutes of the July meeting of the Federal Open Market Committee (FOMC) showed that most officials on the Federal Reserve Board favored a rate cut in September if inflation continues to cool.
The minutes showed that at the July meeting, a “vast majority” of policymakers “believed that if data continued to move in line with expectations, it would likely be appropriate to ease policy at the next meeting.” They also noted that “many” Fed officials viewed the stance of interest rates as restrictive and that “some participants” believed that, with inflation pressures continuing to cool, an unchanged rate would mean that monetary policy would increase the drag on economic activity.
The minutes boosted sentiment, with traders betting the first rate cut will come in less than 28 days (the next FOMC meeting is scheduled for September 18). The debate now centers on the size of the first rate cut, with the CME Group’s FedWatch tool showing a 64% chance of a 25 basis point cut in September and a 36% chance of a 50 basis point cut.
The latest data released by the U.S. Bureau of Labor Statistics also boosted hopes for a rate cut. In the 12 months ending in March, nonfarm payrolls are likely to fall by 818,000, or about 68,000 per month. In addition to the total number, the report revised the employment level by 0.5%, the largest since 2009. The final revised data will be released early next year, but it suggests that the cooling of the labor market will take longer than most people think.
According to BitPush data, Bitcoin (BTC) rebounded above $61,000 amid rising sentiment for rate cuts, jumping from the $59,500 support level to an intraday high of $61,865. As of press time, Bitcoin was trading at $61,393, up 3% in 24 hours.
Altcoins largely followed Bitcoin's gains, with 90% of the top 200 altcoins rising on Wednesday. Fantom (FTM) led the gains, up 15.7%, followed by Compound (COMP) and Polygon (MATIC), up 15.3% and 14.4%, respectively. Helium (HNT) led the declines, down 4.6%, cat in a dogs world (MEW) down 3%, and Sui (SUI) down 2.9%.
The current overall market value of cryptocurrencies is $2.15 trillion, with Bitcoin accounting for 56.2%.
In the U.S. stock market, after falling in midday trading, the major indices rebounded and moved higher after the release of the FOMC minutes, with the S&P 500 and Nasdaq 500 rising 0.42% and 0.57% respectively at the close, while the Dow Jones fell sharply before the close and finally closed flat.
Analysts: Be cautious when entering the market
Although the expectation of a rate cut in September is certain, market analyst Bloodgood warned that many people will use this opportunity to inject FUD (fear, uncertainty and doubt) into the market, and investors are better off looking at macro news rationally.
Bloodgood said: "With less than a month to go until the September FOMC meeting, a rate cut is almost certain; the only question is whether it will be 25 basis points or 50 basis points. The current implied probability in the futures market is that one rate cut is about twice as likely as two rate cuts, but there is no doubt that the long-awaited turning point has finally arrived. You will soon see people confidently saying that this is actually a market disaster because recessions usually occur after the start of a rate cutting cycle."
Bloodgood explained: “When you see these overconfident comments, remember the following: First, how the market will react depends largely on whether these rate cuts are seen as a desperate attempt to repair a badly damaged economy or as a way to stimulate growth after a soft landing, and second, the key word is often; recessions tend to occur after the start of a rate cutting cycle, but the probability of this (if we look back at the rate cutting cycles since 1970) is about 60%, not 90%+.”
Bloodgood believes: “Finally, and most importantly, even in cycles where a recession does occur, the S&P 500 will still be higher for most of the subsequent year, so in summary, take recession news with a grain of salt.”
Looking at Bitcoin’s weekly chart, Bloodgood said Bitcoin is currently in an accumulation zone, but there are no clear signs of where it will go next. He said: “In the big picture, we still see a bearish structure, so there is nothing new here - as long as we don’t make higher highs, there is no hope of continuation, and every upward move will be tested on the downward trend line, so make sure not to enter the market too early.”
Legendary trader Peter Brandt said on the X platform that the BTC/GLD ratio shows the price of Bitcoin relative to gold. The ratio is currently 23.4. BTC is still below its 2021 high. The ratio has room to fall below 20. It needs to break through 32.5 to declare BTC/GC in a bull trend.
