It is very interesting to see the crypto sector following the trend of the U.S. stock market. This year’s trend is basically a replica of last year!
It peaked in March and then continued to fall without a break. It fell 4 days a week, and fell by several points every day. It fell for several months. Last year, it fell for 6 months before rebounding. It has also fallen for 6 months so far this year. The interest rate cut in September is nominally good news, but the capital market generally treats it as a good news. Now the US stock market is actually reflecting the interest rate cut in advance and is falling and correcting. #小非农增幅创3年多新低
With the release of yesterday’s non-agricultural data:
- US unemployment rate in August was 4.2% (previous value: 4.30%; market expectation: 4.20%) – in line with expectations
- US non-farm payrolls in August: 142,000 (previous: 114,000; market expectation: 160,000) – lower than expected
In other words, the data is in line with expectations, which is a good thing, but its performance in the crypto market is indeed bad news!
At night, Bitcoin fell below 555, and the lowest point was around 525. Many people wondered why the price fell so much despite the favorable data yesterday. #美国8月非农就业人数不及预期
The data is positive, why did it fall so much?
The August non-farm payrolls were lower than expected, but the unemployment rate fell, breaking away from the triggering factors of the "Sam Rule Recession". After the data came out, the crypto market fell 5% and the Nasdaq fell 2.55%. There are several reasons for this:
1. First, we need to look at the overall situation. The data is not bad, but it is definitely not good - there is no clear answer as to whether the rate cut will be 25 basis points or 50 basis points. Based on the data alone, we do not think that the rate cut will be 50 basis points, but the market trend seems to be preparing for a 50 basis point cut. It is worth noting that the cumulative number of non-farm payrolls in the United States in June and July was revised down by 86,000 (the number of new non-farm payrolls in July was even revised from 114,000 to 89,000), which is a factor that breaks the balance.
2. Secondly, the data is conducive to interest rate cuts, but it also reflects the weakness of the economy and the Fed’s panic about the economic outlook.
3. The realization of expectations. The previous rise was all hyping up the expectation of interest rate cuts. After the data was released, many Federal Reserve officials made clear their stance on interest rate cuts. The previous expectations had been digested, and the market wanted more, which led to a sell-off in the market.
The market has been really difficult to play in recently. As the U.S. is approaching its interest rate cut cycle, large funds in the market are tightening their grip. It is estimated that the main theme of the market in the next two weeks will still be risk aversion.
What may happen next:
This data could affect the direction of the remaining two months of the presidential campaign. If there is another sluggish non-farm report, Trump's previous remarks that the economic situation under Biden (Harris) is deteriorating will be further confirmed, which may lead to Trump winning the election.
Don’t be too pessimistic, the market will fluctuate within a wide range!
1) BTC is still fluctuating widely up and down in this large-scale descending channel;
2) The U.S. stock market fell below the long-term daily rising trend line. The interest rate cut marked the beginning of the volatile decline of the U.S. stock market, which would drag down BTC to some extent;
3) In extreme cases, BTC may drop to around 480; in general, it will drop to around 525;
4) After two or three interest rate cuts, BTC began an upward trend. Hold on!
Regarding the impact of interest rate cuts on Bitcoin: not immediate but slow and gradual
The non-farm payrolls data supports a rate cut, although it is lower than expected but not a major problem, and higher than July. At the same time, the unemployment rate has fallen, breaking away from the trigger of the "Sam Rule recession".
The current situation is that the labor market problem is not optimistic. The first rate cut of 25BP is obviously not enough, but if the rate is cut by 50BP, the market will worry about the recession expectations, and the Fed is unwilling to give in.
So what impact will the next interest rate cut have on the crypto market?
The last two rounds of interest rate cuts should be in 2019 and 2020. In 2019, there were three interest rate cuts in July, September and October, each time by 25 basis points. This round of interest rate hikes occurred before the interest rate cut, from around 4,000 to more than 10,000, but fell back after the interest rate cut. $BTC
In March 2020, two rounds of interest rate cuts were carried out, the first round was 50 basis points, and the second round was 100 basis points. It happened that DeFi Summer came in 2020 and Bitcoin began to soar in September, reaching its highest point in 2021.
It can be predicted that the impact of interest rate cuts on the market will not be immediate but slow and gradual, especially as events such as ETFs further complicate the impact on the Bitcoin market. Therefore, it is expected that small market conditions may fluctuate, and large market conditions may really have to wait until next year. Of course, the instantaneous impact caused by some temporary black swan events and the changes in market sentiment caused by some occasional hot spots cannot be ruled out.
Bitcoin goals for 2024 and 2025
Why is there a drop in prices before and after a rate cut?
At the beginning of the interest rate cut cycle, funds will seek safety and begin to flow out of the United States. Non-US currencies will strengthen, which will also take away some funds from US stocks, causing liquidity to decline, thereby triggering a short-term decline in US stocks.
With the arrival of multiple interest rate cuts, liquidity will come again, because as interest rates fall, funds deposited in banks will go to markets with higher yields, that is, US stocks.
So how will Bitcoin perform this year and next?
Analysts believe: Just like in 2022, at some point we should also see the day when the RSI reaches its historical peak every month. If Bitcoin is not going to go to zero and the story of the four-year cycle ends, this is exactly what we need to witness. Kyledoops said in his latest assessment that we are on the verge of a big swing, just like in 2012, 2016 and 2020 a few hours ago.
Bitcoin’s current price action reflects the calm before the storm, marking the end of a blue year, an important period of quiet that sets the stage for an explosive “red year.”
“Historically, this phase precedes all-time highs, as seen in 2012, 2016, and 2020, and signals that the next major upswing is just around the corner.”
However, you shouldn’t focus too much on historical data because when that data breaks, you’ll find headlines like “this is the first time this has happened” that will trigger your frustration.
If you are feeling confused and uneasy about the market now and don’t know how to deal with the next interest rate cut strategy, you can come and talk to me!
