Financial asset prices trended higher on Thursday as new U.S. inflation and labor data further supported expectations that the Federal Reserve will begin cutting interest rates next week.

The U.S. Producer Price Index (PPI) report for August showed that wholesale prices rose 0.2% month-on-month, slightly higher than economists' expectations, and rose 1.7% year-on-year, in line with expectations.

The three major U.S. stock indices closed higher, with the S&P, Dow Jones and Nasdaq rising 0.75%, 0.58% and 1.00% respectively. Spot gold surged 1.91% intraday to a record high just below $2,560 an ounce.

Bitcoin surpassed $58,000 and has been trading in a narrow range around this price, driven by gains in U.S. technology stocks and gains in Asian equities.

The total market value of stablecoins exceeded US$170 billion, a new high since May 2022, with a 7-day increase of 0.22%. Among them, the market value of USDT exceeded US$118.38 billion, accounting for 69.7%. Stablecoins provide important liquidity support for the crypto market. Because their value is linked to fiat currencies, stablecoins can serve as a bridge between crypto assets and fiat currencies for investors, facilitating quick entry and exit of the market. When the market value of stablecoins increases, it usually means that market liquidity increases.

Expected volatility

The CPI and PPI inflation data released this week were not far from forecasts, and the Fed seems to be about to enter a fairly orderly rate cutting cycle, which should be very positive for risk assets.

Historically, rate cuts "tend to be accompanied by some initial downside volatility, but that should be muted given the upcoming election. Barring some truly unexpected economic developments, the macro outlook for the fourth quarter remains fundamentally bullish."

Regarding Bitcoin, the price of Bitcoin has fallen to around $50,000 since last week, but bulls stepped in to "save the situation" because this time "the pullback is not as fast as in early August, which shows that bears are exhausted."

Subsequent turning points

1 - The election result may be a key point

The interest rate cut in February-September should be fully priced in and will not have a big impact on the overall market.

3 - A more critical point of uncertainty is when the Fed will stop QT, which is estimated to be at the end of the year

End

Cryptocurrency is mainstream. It may not be mainstream adoption, but it is mainstream entertainment. How many people around you have not heard of cryptocurrencies? Cryptocurrency is a hot topic in the US presidential election today, how can it not be mainstream?

People like to be "early birds" and they fool themselves into thinking that they can make money if they act early. Participation is a prerequisite for success.

Cryptocurrency has adopted its own Manifest Destiny culture. Whether you’re a Bitcoin, ETH, or SOL maximalist, you believe in the legend of the four-year cycle. Almost everyone believes that cryptocurrencies are destined to grow, and every four years a big bull run will suddenly appear and lead us to the land of abundance.

But as the industry continues to scale, imitation and borrowing become more valuable than innovation. The crypto industry now uses the mantra of a four-year cycle to continue the idea that "early is an advantage." This may change, and participation may not be enough. The consequences of complacency will eventually come.