The U.S. jobs market has weakened significantly, increasing speculation that the Federal Reserve will implement a 25-basis-point rate cut in September. This development has sparked renewed optimism in the cryptocurrency market, with Bitcoin, Ethereum, and XRP showing signs of stabilization after a period of underperformance [1].
Ask Aime: What will happen if the Federal Reserve cuts interest rates and how will it affect Bitcoin?
According to Polymarket data, the probability of a Fed rate cut in September has climbed to 70% as of August 1, up sharply from earlier in the week. The odds of a more aggressive 50-basis-point cut stand at 6.8% [1]. These expectations follow a disappointing July jobs report, which revealed a mere 73,000 new jobs, far below the estimated 110,000. This figure was compounded by downward revisions to May and June job figures, marking the largest two-month adjustment since the onset of the pandemic in 2020 [1].
The unemployment rate rose to 4.2%, and wage growth remained robust at 0.3% month-on-month and 3.9% year-on-year. Analysts suggest that the weaker labor market narrative weakens the Fed’s rationale for maintaining higher interest rates, potentially opening the door for easing measures without appearing to capitulate to political pressure [1].
Greg Magadini, Director of Derivatives at Amberdata, emphasized the market’s surprise at the sharp downward revisions and weak July data, which caused the U.S. dollar to weaken and bond yields to fall. He noted that this scenario provides the Fed with flexibility to cut rates without appearing to act under external pressure [1].
Anndy Lian, a blockchain advisor, pointed out that lower interest rates reduce the opportunity cost of holding non-yielding assets like Bitcoin and Ethereum. He stressed, however, that the market’s response will depend on the Fed’s communication strategy [1].
Prediction markets reflect this shift in sentiment. A contract for a December rate cut now shows over 60% of participants anticipating another 25-basis-point reduction [1].
Despite this optimism, experts caution that crypto markets face a traditionally weak period from August through mid-October. Tom Bruni of Stocktwits highlighted that recent ‘good news’ has failed to significantly boost prices, and while a Fed rate cut could provide support, economic deterioration could undermine any positive momentum [1].
Sunil Raina, CEO of CereBree, echoed these sentiments, stating that a September rate cut appears to be the only viable option unless the Fed risks damaging the economy. However, he warned that inflation and geopolitical risks remain, contributing to ongoing volatility [1].
The broader context is a divided Federal Reserve navigating political pressures, particularly from President Donald Trump, who has publicly criticized Jerome Powell and urged direct intervention by the Fed. While the Fed has avoided premature action, the weaker labor data may now serve as cover for a policy shift without appearing politically compromised [1].
This evolving situation has significant implications for Bitcoin and other risk assets in the coming weeks as investors closely watch for further developments in both the labor market and monetary policy [1].
Source: [1] Bitcoin, Ethereum, XRP Struggle After Underwhelming Jobs Report: Will A September Rate Cut Save The Bull Run? (https://www.benzinga.com/crypto/cryptocurrency/25/08/46802086/bitcoin-ethereum-xrp-struggle-after-underwhelming-jobs-report-will-a-september-rate-cut-save-the-bull-run?utm_source=coingecko&utm_campaign=partner_feed&utm_medium=partner_feed&utm_content=site)
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Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.
Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.
An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.
