According to CoinDesk, the U.S. government is set to release its Nonfarm Payrolls Report for August, a critical economic indicator for the Federal Reserve's upcoming rate-setting meeting. Economists predict an addition of 160,000 jobs in August, an increase from July's 114,000. The unemployment rate is expected to decrease slightly to 4.2% from 4.3%. A stronger-than-expected report or one that meets expectations may lead the Fed to cut its benchmark fed funds rate by 25 basis points. However, a weaker report could prompt traders to anticipate a 50 basis points cut.
This week's economic data, including the ISM Manufacturing PMI, the Fed's Beige Book, and the ADP August jobs report, has generally been soft, increasing the likelihood of a more aggressive policy easing by the Fed. According to CME FedWatch, the probability of a 50 basis point rate cut has risen to 44%, up from 34% a week ago.
Historically, rapid monetary easing has been seen as a positive catalyst for bitcoin prices. Bitcoin was created during the global financial crisis over 15 years ago, coinciding with the Fed's aggressive rate cuts and economic stimulus measures. The Fed's 2020 Covid-era rate cuts and monetary stimulus propelled bitcoin from a niche asset to a $1 trillion asset class within a year.
However, the current easing cycle has not generated the same enthusiasm for bitcoin. Despite signals of impending rate cuts, bitcoin's price has continued to decline. Currently trading at $56,300, bitcoin has dropped 5% over the past month and is down more than 23% from its record high of over $73,500 six months ago.
Quinn Thompson, CIO of hedge fund Lekker Capital, commented on the weak economic data this week, noting the rising conviction in a 50 basis point Fed cut in September. He highlighted the cautious sentiment among traders, who have been hesitant to buy due to recent market conditions.
