Bitcoin (BTC), fluctuated around $20,000 until Aug. 31, as the outlook for inflation in the United States dimmed.
Data from TradingView and Cointelegraph Markets Pro showed that BTC/USD dropped below the top of the last halving cycle overnight. However, it gained ground and circled $20,300 today.
The rangebound moves were accompanied by modest recovery for U.S stocks with the S&P 500 up 0.1% and the Nasdaq Composite Index gaining 0.6% in the first hour of trading, respectively.
However, there were still concerns about the Federal Reserve’s plans to tackle inflation following last week’s dark speech by Chair Jerome Powell.
Despite Powell’s rhetoric, KPMG’s chief economist Diane Swonk stated that the whole idea of a “soft landing” for the U.S. was no longer possible.
Powell’s speech had actually “buried the idea of a soft landing”, she explained to Bloomberg and revealed that the Fed intended to maintain growth to “grind down inflation.”
Swonk said, “It’s a torturous proces but less torturous than an abrupt recession.”
The mood was so conservative regarding risk assets that attention remained on dollar strength as it continued to circle 20-year highs.
Michael van de Poppe CEO of Eight Global said that it was essential to have a stable or weak dollar for risk-on assets like Bitcoin. “As upwards pressure can occur on the markets, it is important to have a steady Dollar or a weak USD,” he told his Twitter followers.
“The $DXY will be very important in the coming month.” This potential bearish divergence could also be the first sign.
U.S. dollar index (DXY), 1-hour candle chart Source: TradingView
Fed rate hike: Markets are “at the craps table”.
September is a traditional “red” month for Bitcoin. It also promised a crucial Fed decision on key rate increases, along with August non-farm payrolls (NFP), and Consumer Price Index(CPI) inflation data.
Related: Bitcoin mining is now more competitive than ever, even though BTC lost 13% in August
CME Group’s FedWatch Tool indicated that expectations were for a 75-basis point hike, echoing July.
QCP Capital, a trading firm, stated that markets have returned to trading the 21 Sep FOMC odds, whether they will increase 50bp or 75bp, in its most recent market update.
“More, Powell has effectively given this policy decision to both the 2 Sep NFP (and the 13 Sep CPI) – which basically means that investors are all now at the craps table, betting either over or under.”
QCP suggested that additional impetus to a higher rate hike could come from the longer than normal gap between September’s revision and July’s due to August lull.
Rate hike decisions are normally made on a monthly basis.
Chart showing the Fed’s target rate probabilities. Source: CME Groupcom. You should do your research before making any investment or trading decision.
Eileen Wilson –Technology and Energy
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