It will still take time for market liquidity to recover.
Written by: 1912212.eth, Foresight News
The crypto market is quite dull. BTC fell again today from around $58,000 to as low as $55,606. ETH also fell from around $2,500 to around $2,300. Altcoin also fell due to the performance of the market. According to coinglass data, the entire network had a liquidation of $196 million in the past 24 hours, of which long orders had a liquidation of $172 million.
The performance of BTC spot ETF is not optimistic either. Since the data on August 27 turned into a large net outflow of US$127 million, it has been in a net outflow state.
If you bought Altcoin from October last year and have not sold them, then you have probably lost all your profits. If you bought Altcoin after March this year and still hold them, then you may be deeply locked up. The crypto market has continued to fall due to the continuous selling of profit-taking and the lack of hot narratives. In the final analysis, market liquidity is still very scarce.
Insufficient funds in the market, so funds from outside the circle come to make up for it. Although for crypto market investors, excessive attention to macro factors can easily lead to missed opportunities, it must be admitted that macro factors still greatly affect the volatility of the crypto market. The most important example is that before and after the release of non-agricultural employment data, CPI data and Federal Reserve data, BTC and the entire market often have a large amplitude in a short period of time.
At a time when the market conditions are continuing to decline and become sluggish, can the release of the above-mentioned macro data bring a turning point to the market?
Non-agricultural employment data
On September 6, the last non-farm report of the Federal Reserve this month will be released. Against the backdrop of the established downward trend in inflation, this employment report will undoubtedly be one of the most important data this week.
The seasonally adjusted non-farm payrolls in the United States for July, announced on August 2, were 114,000, lower than the expected 175,000. After the release of the data, it caused widespread concern in the market. Some even believed that the US economy was at risk of recession, which triggered a week-long plunge in the global market. Cryptocurrency, as a risky asset, was the first to be hit and was greatly negatively affected.
BTC fell from around $65,000 for four consecutive days, even falling below $50,000 at one point, hitting a low of $49,000 and causing a sharp spread of panic in the market.
Recently, Swissquote analyst Ipek Ozkardeskaya said in a report that the dollar could rise if the U.S. non-farm payrolls data released on Friday is stronger than expected, as it would weaken expectations that the Federal Reserve will cut interest rates by at least 50 basis points this year.
According to economists' forecasts compiled by Bloomberg, the number of new jobs in August is expected to be between 100,000 and 208,000, with a median of 163,000, and the unemployment rate is expected to gradually decline to 4.2%. Morgan Stanley predicts that the unemployment rate will drop to 4.2% in August, and the number of new non-agricultural jobs is expected to rise to 185,000.
At a time when economic growth is the only focus of the market, these data have the potential to affect market sentiment.
CPI Price Index
On September 11, the market will release another important data: the CPI price index.
The U.S. unadjusted CPI for July, released on August 14, was 2.9% on an annual basis, falling for the fourth consecutive month and returning to the 2-digit level for the first time since March 2021. The market expected it to be 3%. The U.S. unadjusted core CPI for July was 3.2% on an annual basis, falling for the fourth consecutive month and the lowest level since April 2021, in line with market expectations.
The data fell into the official target range set by the Federal Reserve, further supporting expectations of a rate cut in September.
After the data was released, BTC quickly surged to $61,800, and then fell back to above $61,000. After a brief drop to around $57,700, it rebounded strongly to above $65,000 the following week.
Although great progress has been made in fighting inflation over the past two or three years, it is still too early to rule out risks. First, as major central banks around the world gradually start an easing cycle, the growth rate of money supply has picked up again, pushing up price risks. Second, the stickier inflation sub-items still have upside risks. Third, geopolitical shocks may push up commodity prices.
Federal Reserve Decision
On September 19, the Federal Reserve will officially announce its interest rate decision.
On August 23, Powell said at the Jackson Hole Global Central Bank Annual Meeting that "the time has come", sending the clearest signal so far of a September rate cut, which is a key turning point in the Fed's two-year fight against inflation. Since July 2023, the Fed has kept the benchmark interest rate between 5.25% and 5.5%, the highest level in more than 20 years.
This decision will be affected by the two data mentioned above. Currently, the market generally estimates that the probability of a 25% interest rate cut is slightly higher, while the probability of a 50% interest rate cut is relatively small.
Bond traders are pricing in about 100 basis points of rate cuts this year, meaning there is a chance of a rate cut at every Fed policy meeting between now and December, including a big 50 basis point reduction.
It is worth noting that the Fed’s announcement of a rate cut may not immediately trigger a massive rise in the crypto market. When the Fed started its rate cut cycle in August 2019, BTC fell 4.89% on a monthly basis and continued to fall 13.54% the following month. BTC fell from $12,000 to around $7,700, and did not begin to rise until after the March 12 incident in 2020.
summary
While the crypto market is still in a dull state, macroeconomic variables in the next few weeks may have a significant impact on market funds. It will still take time for market liquidity to recover, but that moment may not be far away.
