As the outlook for inflation in the United States deteriorated, Bitcoin ( ) fluctuated at the $20,000 mark through Aug. 31.
Data from Cointelegraph Markets Pro, TradingView indicated that BTC/USD dropped below the top of the last halving cycle overnight, but then recovered enough to circle $20,000.00 on the day.
The r angebound movements were accompanied by modest recoveries in U.S stocks with the S&P 500 up 0.1% and the Nasdaq Composite Index up 0.6% respectively within the first hour of trading.
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 Bloomberg and stated that the Fed intended to maintain growth to “grind inflation down”
Swonk said, “It’s a torturous proces but less torturous than an abrupt recession.”
With the mood so conservative regarding risk assets, attention was also on the strength and stability of the dollar as it continued to highs for twenty years.
“For risk-on assets such as Bitcoin, it is essential to have either a strong or stable Dollar,” Michael van de Poppe (CEO of Eight Global), stated to 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. U.S. dollar index (DXY), 1-hour candle chart. Source: TradingView
Fed rate hike: Markets are “at the craps table”.
September , a traditionally “red” month for Bitcoin promised a crucial Fed decision on key rate increases along with August Nonfarm Payrolls and Consumer Price Index (CPI), inflation data.
Similar: Bitcoin mining is now more competitive than ever, even though BTC lost 13% in August
Expectations were for a 75-basis point hike, echoing July, CME Group’s FedWatch Tool reported on the day.
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.
“Worse, Powell has effectively given this policy decision to both the 2 Sep NFP, and the 13 Sep CPI. This basically means that investors are now all at a craps table, betting either over or under.
QCP suggested that the additional impetus for a higher rate hike could be due to the longer than normal gap between September’s revision and July’s revision, QCP said. This is likely to be due to August’s lull.
Rate hike decisions are normally made on a monthly basis.
Fed target rate probabilities chart. Source: CME Group
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