The overall selling trend is that cryptocurrencies will have a downward trend until August, and we have to collect them in these areas. In fact, most people are already profitable by trading during the intermediate rise, but what I don’t understand is:
I started collecting from the so-called bottom (!), I bought in the demand area, but I saw that it fell even more, that is, between 10% and 20%, altcoins lost sales, and all the data were partially positive! What happened?
August 5th Crash: The Beginning of a False Spring
On August 5, 2024, Asian markets suddenly collapsed, quickly affecting the global economy. Federal Reserve Chairman Jerome Powell warned that interest rate cuts could weaken the economy, which became a precursor to the crisis. The "likely weakening" mentioned by Powell was actually the root cause of the violent collapse in a short period of time.
Subsequently, economic pressures intensified in just one week, leading to negative volatility in global markets.
The End of Monetary Tightening and Commodity Markets
The monetary tightening period has ended with the M2 money supply hitting a new high. Now, the central bank hopes to achieve short-term relief by providing a large amount of financial support to the market.
This situation may usher in a new spring in the commodity market. Assets such as Bitcoin and gold have actually appreciated in value (short-term declines are normal) and will show strong momentum in the future. In particular, the demand for risky assets will increase!
The gap between what investors perceive and reality!
Warnings were sounded long ago about danger signs in the US budget, the quagmire in the bond market, and the stock market collapse, yet the media chose to ignore these urgent signs and offer a false optimistic story.
The media often creates positive perceptions to prevent fear and panic, thereby causing the public and investors to view economic conditions in a more positive light. While this protects investors in the short term, it makes them dependent on inflation in the long term, effectively making people let down their guard!
Expectations of a Fed rate cut
Yesterday’s news: The inflation rate for personal consumption expenditures (PCE), the Federal Reserve’s preferred inflation indicator, was 2.5% in July, lower than the expected 2.6%.
Core PCE inflation came in at 2.6%, below expectations for 2.7%.
Both headline and core PCE inflation were unchanged compared with June.
The market assesses the probability of the Federal Reserve holding an emergency meeting to cut interest rates at 60%. If such measures are not taken, the crisis may deepen further and it will become more difficult to control the situation.
We can consider the central bank to support the market by providing liquidity in the short term as the most likely development. However, although this situation may bring positive results in the early stage, it may increase inflationary pressure and threaten economic stability in the medium and long term.
▪️The data was slightly below expectations, suggesting inflation was under control, but did not indicate a strong enough improvement in inflation.
Impact on the crypto market 👇🏻
🟢 Positive impact:
A lower-than-expected PCE reading could increase the likelihood that the Federal Reserve will slow or stop raising interest rates. Such a scenario could increase demand for risky assets, supporting a positive move for cryptocurrencies.
🔵 Neutral Impact:
The data did not bring strong optimism to the market because there was no significant drop compared to the previous level. Therefore, the market will not experience drastic fluctuations, but will see a stable trend or a small increase.
▪️ The first week of September may seek stability depending on macroeconomic conditions.
Strategic Planning
(PCE data and September expectations)
The data after yesterday's PCE data release was not enough to trigger a major bull market.
However, if it breaks above $60,000, the up move is likely to continue.
▪️Expectations for September:
If inflation data such as the PCE data continue to decline and the Fed's signal of stopping interest rate hikes becomes stronger, the upward trend of the crypto market is expected to be more obvious in September.
Especially in the second half of September, volatility may increase and the bull market may strengthen. However, it is very important to be prepared for volatility and trade at a strategic level.
In conclusion, as long as BTC remains strong at the $59,030-$59,300 support level and a monthly close is above $61,000, the bullish momentum can be sustained. The bull run could prevail in early October.
Future strategies
The Great Depression of 1929 was one of the most significant economic crises in history. We are arguably facing a similar Great Economic Crisis in 2024. While comparing the two periods is not entirely accurate, it helps us better understand the severity of the current economic situation and its possible impact.
Two main scenarios and responses:
1) The Big Collapse:
If the current economic imbalances worsen and a major collapse occurs, this will lead to severe financial and economic problems worldwide. The Great Depression of 2024 will be on par with the Great Depression of 1929.
Impact: This scenario could lead to higher unemployment, lower consumer spending, and a contraction in overall economic activity. In addition, there could be severe financial crises, such as corporate bankruptcies and the collapse of financial institutions. Social and political instability could also ensue.
Important for investors!
Increased demand for foreign exchange and gold: Economic collapse and currency devaluation may cause investors to turn to safe havens such as foreign exchange and gold. This will push up foreign exchange and gold prices.
Increased market volatility: A large-scale economic crisis could lead to high volatility in stock and financial markets. The value of companies could decline and investor confidence could weaken.
Interest rates and loans: A shrinking economy could cause the central bank to raise interest rates or tighten lending conditions. This would increase the cost of borrowing, which would affect investment and consumer spending.
Cryptocurrency Investment (BTC & ETH)
“Due to their independence from the traditional financial system, cryptocurrencies may be seen as a safe haven and thus in demand. However, the economic crisis may lead governments and central banks to impose stricter regulations on cryptocurrencies. Such regulation could have a negative impact on the crypto market.”
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2) Delay and inflation (printing large amounts of Q and US dollars):
If central banks print more money and increase money supply in order to temporarily support the market, this may bring short-term relief. In other words, there may be a false spring.
However, we could face unprecedented dollar inflation and worsening economic imbalances in the long term.
Impact: This scenario could lead to high inflation, low purchasing power, and economic uncertainty. Real wages and savings could be devalued as consumer prices rise. In addition, such inflation could increase debt burdens and negatively impact economic growth. While it may provide relief in the short term, it could be costly in the long run and could lead to new economic problems.
Key points for investors to pay attention to!
High inflation: Ample liquidity and dollar inflation could lead to high inflation rates, which would erode the real value of savings and investments and affect living standards.
Consumer Spending and Borrowing: Rising inflation could affect consumer spending and borrowing. In a high inflation environment, investors may need to develop more cautious strategies to balance costs.
Cryptocurrency Investment ($BTC - $ETH)
The rise of altcoins and their investment attractiveness: In a high inflation environment, currencies may be seen as a store of value.
Investor confidence: High inflation and economic uncertainty may increase investment confidence in cryptocurrencies. However, high volatility and regulatory uncertainty in cryptocurrencies may prompt investors to be more cautious in taking risks.
The impact of USD on the Bitcoin market
“The massive amount of money being printed by the US could cause investors to move into risk assets. Bitcoin would be one of the first risk assets to benefit!”
Price increase: An increase in money supply could drive up demand for Bitcoin, leading to higher prices. Investors may see Bitcoin as a store of value.
Market Volatility: Increased money supply could spur speculative trading. Investors could trigger price volatility by actively buying and selling Bitcoin and altcoins.
Institutional and large investor participation: Large investors like BlackRock, VanEck, Valkyrie, GrayScale, MicroStrategy, etc. may increase their investments in Bitcoin and cryptocurrencies using the increased supply of USD. This may enhance market volatility and push up prices.
Investor psychology and media influence: Money supply and price increases may be reported positively in the media. This can have a positive impact on investor psychology, attracting more investors to the market. Hype and FOMO (fear of missing out) emotions may ensue. In this case, prices in the overall risk market may rise further.
In conclusion, the expectation of a rate cut at the Fed meeting in September could increase liquidity inflows, which could have a positive impact on the cryptocurrency market. If the Fed cuts interest rates, it could spark investor interest in the crypto market, and Bitcoin could test the key resistance level of $72,000 to $75,000. If a rate cut is priced in in advance, prices could also start moving in that direction.
However, without a rate cut, risk appetite in the market could decline and Bitcoin prices could come under pressure.
Overall Assessment
Investors and crypto traders may be affected by these scenarios in different ways. A large-scale economic collapse could increase investment confidence and demand for FX/gold, while ample liquidity and inflation could lead to high volatility and uncertainty across all asset classes, including cryptocurrencies.
