Original | Odaily Planet Daily (@OdailyChina)
Author | Fu He How (@vincent 31515173)
Last night, Federal Reserve Chairman Powell made positive remarks on the September interest rate cut at the Jackson Hole conference, and Bitcoin and the overall crypto market saw a sharp rise.
OKX market data shows that at 22:00 last night, BTC first briefly broke through 62,000 USDT, and then briefly dropped; within 8 hours, BTC once again broke through 65,000 USDT, with the highest increase reaching 6.9%. As of press time, BTC is temporarily reported at 63,918 USDT, with a 24-hour increase of 3.87%.
Altcoins led by ETH also performed well, breaking away from the previous "Monkey Market" and rising all the way. ETH broke through the 2800 USDT mark, with the highest increase of 6.3%. It is currently reported at 2754.31 USDT, a 24-hour increase of 3.13%; SOL is temporarily reported at 153.5 USDT, a 24-hour increase of 6.29%; ORDI is temporarily reported at 35.43 USDT, a 24-hour increase of 10.7%; PEPE is temporarily reported at 0.000009 USDT, a 24-hour increase of 8.25%; PEOPLE is temporarily reported at 0.0677 USDT, a 24-hour increase of 12.09%.
Affected by the overall market rise, the total market value of cryptocurrencies has also risen sharply. According to CoinGecko data, the total market value of cryptocurrencies has now rebounded to 2.35 trillion US dollars, a 24-hour increase of 3.5%.
In terms of derivatives trading, Coinglass data shows that in the past 24 hours, the entire network has been liquidated for $181 million, of which the vast majority are short orders, amounting to $139 million. In terms of currencies, BTC liquidated $49.4047 million and ETH liquidated $47.8486 million.
Before the speech by Federal Reserve Chairman Powell, U.S. stocks opened higher, with the Dow Jones Industrial Average up 0.41%, the S&P 500 up 0.57%, the Nasdaq up 0.8%, Coinbase up 1.03%, and MicroStrategy up 1.7%.
Fed Chairman Powell: The time has come for policy adjustments
The current rally was mainly due to the positive comments from Fed Chairman Powell on future rate cuts. At the Jackson Hole conference, Powell's overall speech was dovish, saying: "Now is the time to adjust policy. The direction forward is clear, and the timing and pace of rate cuts will depend on future data, the changing outlook, and the balance of risks."
It is worth noting that although the September rate cut was predicted by the market in advance, Powell had not officially stated whether the rate cut would be formally implemented in September. This speech made the market more clear about the Fed's willingness to cut interest rates after September. Therefore, the crypto market swept away the previous downward trend and turned to an upward trend.
In fact, before Powell's speech, the market had high expectations for interest rate cuts.
For example, Matrixport's weekly report states that financial markets appear calm, but a major turning point may be coming as gold, oil, treasuries and the dollar are all close to breaking support levels. This situation indicates that major macroeconomic changes are imminent, but their impact will take several months to fully manifest. Due to the future-oriented nature of financial markets, these changes may also bring more significant trend changes.
Bostic of the Federal Reserve said that the Fed's policies have produced results, and we can begin to gradually return to a normal policy stance. We cannot wait until inflation falls back to 2% to adjust the policy rate. The Fed needs to think carefully about changes in the labor market and hope that (policy) will return to normal in a smooth and orderly manner. The performance of the labor market shows that it is gradually returning to a more normal state. The Fed is "close" to the time to cut interest rates, and the decline in inflation has exceeded expectations, so it makes sense to adjust the view on rate cuts in advance.
At the same time, Atlanta Fed President Bostic said in an interview at Jackson Hole that an early rate cut might be appropriate and suggested there might be more than one rate cut this year.
Before Powell’s speech, according to CME’s “Fed Watch,” the probability that the Fed would cut interest rates by 50 basis points by November was 54.2%, the probability that it would cut interest rates by 75 basis points was 38.9%, and the probability that it would cut interest rates by 100 basis points was 7.0%.
However, after Powell expressed that the policy was about to change, the CME "Fed Watch" data also showed some positive changes. The probability of the Fed cutting interest rates by 50 basis points by November was 43%, the probability of cutting interest rates by 75 basis points was 45.2%, and the probability of cutting interest rates by 100 basis points was 11.8%. The swap market remained stable, and it was expected that the Fed would cut interest rates by nearly 100 basis points before the end of the year. Traders increased their bets on the Fed's interest rate cut after the speech of Fed Chairman Powell.
The market is more optimistic about the expansion of interest rate cuts, and the probability of a cumulative interest rate cut of more than 75 basis points by November continues to increase. Many research institutions and media have expressed their views on the extent of the Fed's interest rate cuts this year:
The Wall Street Journal revealed that Federal Reserve Chairman Powell sent the strongest signal of a rate cut so far, saying that the Fed intends to take action to prevent further weakening of the U.S. labor market.
Peter Cardillo, chief market economist at Spartan Capital Securities, said Powell's speech was dovish and believed that what Powell meant was that the Fed would cut interest rates by 50 basis points in September and there would be two rate cuts this year.
Uto Shinohara, managing director and senior investment strategist at Mesirow, said Powell validated the market's expectations for a September rate cut while continuing to emphasize data dependence and future economic prospects. Expectations that the Fed will soon cut rates along with other major central banks pushed the dollar lower. Expectations for the September meeting remain around 30 basis points, and total rate cut expectations for the year have only increased from around 95 basis points to the current 100 basis points.
Fed's Harker said we need to start cutting interest rates. The Fed should start the process of cutting interest rates, and this process should continue.
Steve Englander, global head of foreign exchange research and macro strategy at Standard Chartered Bank, said a 50 basis point rate cut is not the first step, and if the labor market continues to weaken, a Fed rate cut could come soon.
Claudia Sahm, a former Fed economist, said in an interview that there is a strong argument for a 50 basis point rate cut. Doing so would help the Fed "recalibrate" and help stabilize the unemployment rate, which has become too low.
International Monetary Fund (IMF) chief economist Gulan Shah said the Federal Reserve's upcoming interest rate cuts are "consistent" with the IMF's recommendations.
The above institutions tend to believe that the Fed will cut interest rates by 50 basis points in September, but a few institutions have expressed different views, such as:
Stephen Stanley of Santander Bank pointed out that Federal Reserve Chairman Powell emphasized the importance of the upcoming August employment data to the monetary easing cycle at the Jackson Hole conference, which makes this data more critical than the August core CPI, especially against the backdrop of sluggish employment growth in July. If the August data is stronger, it may weaken expectations of a 50 basis point rate cut next month.
Bank of America economists said in a report that despite Powell's more dovish tone at the Jackson Hole conference, the Fed's focus on a cooling labor market still means a 25 basis point rate cut in September is more likely than a 50 basis point cut, barring a very weak jobs report.
At present, after Powell's speech, the market has gradually shifted from the previous discussion of whether interest rates can be cut to the prediction of how many basis points the interest rate will be cut. This is exactly why the financial market needs to constantly hype the market trend by establishing expectations. The overall rise of the crypto market in the early hours of today is also the expectation of how many basis points the interest rate will be cut as a new driving force for the market to rise.
As for whether the Federal Reserve will cut interest rates by 50 basis points or maintain its view of a 25 basis point rate cut, we need to pay close attention to the August employment data released on September 6, which may be the next important time point for changes in the crypto market.
Rate cuts are a foregone conclusion, and the next narrative will focus on the US election
There have been many events that have affected the crypto market this year, whether it is Bitcoin or Ethereum spot ETFs or the Federal Reserve's interest rate cuts. There are corresponding remarks or events to confirm that their goals have been achieved. This year, the only major event that will ultimately affect the market may be the US election.
Polymarket’s data on the probability of winning the U.S. election shows that Trump and Harris have similar probabilities. As of the time of writing, Trump leads Harris by a slight margin of 1%.
But today, independent U.S. presidential candidate Robert F. Kennedy Jr. has withdrawn from the race and said he will support former U.S. President Donald Trump, suspending his campaign rather than ending it and removing his name from the ballot in 10 key states.
This may increase Trump's chances of winning. Given Trump's positive remarks on cryptocurrencies, Trump's inauguration should be the election result that the crypto industry most wants to see.
Among them, Fundstrat co-founder Tom Lee said in an interview with CNBC that Trump's hope of winning the November election may boost asset prices, including Bitcoin. The market currently believes that Trump's chances of winning are higher than polls show, and believes this is a good thing.
Bernstein Research released a report saying that the cryptocurrency market, especially Bitcoin, may undergo a major shift depending on the results of the upcoming US presidential election, and Donald Trump's potential victory may catalyze the bottoming out of Bitcoin prices, leading to an increase in the prices of major cryptocurrencies. Bitcoin prices will only bottom out and rebound if the crypto market becomes interested in Trump's possible victory, as the crypto market continues to interpret the Republican victory as a favorable factor for crypto policies.
On the other hand, if Harris wins, the price of the crypto market may not meet expectations due to Trump's defeat, resulting in a downward trend in prices. However, Jaret Seiberg, an analyst at TD Cowen, pointed out in a report that Kamala Harris's election as president may be more favorable to cryptocurrencies than the current Biden administration. At the same time, Jaret Seiberg also predicted that the Harris administration may support investor protection and retain the SEC's functions in regulating tokens and trading platforms. Investor protection measures under the Harris administration may even be slightly stricter than those under the Trump administration.
However, whether Trump or Harris wins the election, the pace of the crypto industry's gradual integration into mainstream finance will be unstoppable. Perhaps from the perspective of future generations, 2024 will become the most important symbol of the development of the crypto industry to date.
