Aug. 15 crucial date as Bitcoin and altcoins continue to rise

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As a seasoned researcher with a keen eye for market trends, I find myself closely monitoring the crypto landscape, particularly during such pivotal moments as we are experiencing now. The recent surge in cryptocurrency prices is reminiscent of a phoenix rising from the ashes, and it’s hard not to feel a sense of excitement and anticipation.

For four straight days, cryptocurrency values climbed higher due to decreasing worries about an upcoming U.S. economic downturn, following positive unemployment claim figures that eased such fears.

As a seasoned cryptocurrency investor with several years of experience under my belt, I can confidently say that witnessing Bitcoin (BTC) and most altcoins surge by more than 30% from their lowest point this week has filled me with a sense of validation and excitement. Throughout my journey in the world of digital currencies, I have weathered numerous market crashes and fluctuations, but seeing such significant gains fills me with optimism for the future of this industry. It’s moments like these that remind me why I chose to invest in cryptocurrency and why I believe it has the potential to revolutionize our financial landscape.

US inflation report ahead

One significant factor fueling the recent surge in cryptocurrencies and stocks was the US jobless claims report released on August 8th. As per the Bureau of Labor Statistics, the number of new jobless claims fell to 233,000 during the preceding week, marking a significant decrease compared to the previous week when it reached its highest level in months at 250,000.

Last week, a week post the Non-Farm Payrolls report, I noticed an uptick in the unemployment rate, reaching 4.3% – its peak since early 2021. As a crypto investor, this data point can influence my investment strategies as it reflects economic trends impacting both traditional and digital markets.

Consequently, August 15 carries significance for the crypto sector since it’s when the US will release their updated Consumer Price Index (CPI) report. According to economists surveyed by Reuters, they anticipate that the overall CPI figure will decrease from 3.0% to 2.9% in July. Furthermore, the core CPI, which accounts for non-volatile food and energy prices, is projected to decline from 3.3% to 3.2%.

Bitcoin and altcoins could benefit from Fed cuts

Observing a decrease in inflation could potentially be advantageous for Bitcoin and other cryptocurrencies, as it may influence the Federal Reserve’s monetary policy.

During their monetary policy discussion in July, the Federal Reserve signaled a possible reduction of interest rates during their September gathering. Economists are currently debating if the initial decrease will be a modest 0.25% or a larger 0.50%.

Certain institutions such as ING Bank and Citi foresee a decrease of 0.50%, whereas Goldman Sachs and Societe Generale anticipate a smaller reduction of 0.25%. According to a survey by Polymarket, multiple interest rate reductions are predicted for this year.

When the Federal Reserve lowers interest rates (such as during the pandemic in March 2020 when they reduced the official cash rate to zero), cryptocurrency prices often increase. This was evident in 2021 when Bitcoin reached a new peak of $69,000 following the Fed’s rate reduction.

In the year 2019, prior to any subsequent events, Bitcoin experienced a surge of approximately 90%, likely due to the Federal Reserve lowering interest rates in July, September, and October. On the flip side, in the year 2022, as the Fed increased rates, Bitcoin plummeted by about 65.2%. Interestingly, other digital currencies, or altcoins, saw even more significant declines compared to Bitcoin.

One possible explanation for why cryptocurrencies could perform well when the Federal Reserve reduces interest rates is due to a large sum of money in the bond market. Specifically, money market funds at present hold more than $6.2 trillion, and these investors are currently earning returns over 5% per year.

As interest rates decrease, it’s probable that these investment funds will move towards more risky options such as stocks and digital currencies like cryptocurrencies.

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2024-08-09 17:48