Key Takeaways
While macro uncertainty remains, September rate cuts are back on the table. But the elevated profit-taking could keep the market in a sideways structure in the near term, per CryptoQuant.
The chances of Fed rate cuts in September shot higher to 80% on the 1st of August after dropping 20% earlier in the week. This could boost Bitcoin [BTC] in the near term.
After a hawkish pause during the 31st July Fed meeting, market repriced September rate cuts odds lower, dragging BTC to $114K from nearly $120K.
Will Fed rate cut expectations trigger a recovery?
However, a massive downward revision in jobs and a weak report on the 1st of August underscored a risky U.S labor market, raising hopes of a potential Fed dovish pivot to boost the sector.
U.S added only 73K jobs in July, way below the forecasted 106K.
Notably, non-farm payroll (NFP) for May was revised to 19K from 144K, and June was dropped from 133K to 14K. This was a big downward revision and positive macro development, according to market watchers.
In fact, per ZeroHedge, the update mirrored last September’s action that led the Fed to initiate a jumbo cut of 50 bps, triggering an explosive rally for BTC and the broader crypto market.
This prompted interest traders to increase the odds of a 25 bps (basis point) in September to 80%.
Source: CME Fed Watch
What’s next for BTC?
Despite the bullish Fed rate expectations, however, BTC price slipped 2% to $112.7K, mirroring a broader sell-off even in U.S equities on Friday.
For FundStrat CEO and Wall Street analyst Tom Lee, the decline was a ‘normal dip’ and a healthy reset for another leg higher.
But Arthur Hayes, founder of BitMEX, trimmed his Ethereum [ETH] and Ethena [ENA] long positions, stating that more Donald Trump tariffs could further spook markets in Q3. He added,
“US Tariff bill coming due in Q3 …at least the market believes that after NFP print. No major economy is creating enough credit fast enough to boost nominal GDP. So $BTC tests $100k, $ETH tests $3k.”
CryptoQuant also adopted a cautious outlook, noting the market was in a cyclical cooling after the recent third wave of profit-taking.
The on-chain analytics firm added that demand from U.S investors has declined, and the market could consolidate for a few months before breaking higher.
“Following the recent wave of profit-taking, Bitcoin and Ethereum prices may enter a period of consolidation before the next leg higher.”
Source: CryptoQuant
It remains to be seen how the macro front will evolve and impact crypto markets in August and September.
There will be more data and color to the U.S labor markets and inflation on the 7th and 12th of August. These macro data sets could further impact September rate cut expectations and BTC.
