Bitcoin price is “highly dependent” on macroeconomic data: Coinbase

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By TP

Key facts: The market will be looking to the Fed for announcements in mid-September. For Coinbase, rate cuts are not a direct catalyst for the price of bitcoin. Bitcoin (BTC) has been experiencing moments of high volatility in the face of various macroeconomic data, so it seems crucial for the market to follow its development. At the beginning of the month, recession risks in the United States sparked by weaker-than-expected employment data, caused the digital currency to fall. And, last week, rose after a conference by Jerome Powellchairman of the Federal Reserve (Fed), in which he stated that it is time to tighten monetary policy and strengthen the labor market. The price movement can be seen in the following chart: This price action occurs while the adjusted spot (i.e. cash) volumes of bitcoin have been around USD 10 billion per day in August. This figure is double the average registered in the same month during the previous five years, according to recent research by the Coinbase exchange.

Bitcoin (BTC) and Ether (ETH) volatility in August over the past few years. Source: Coinbase. “Market concerns about a cooling labor market leave us very data-dependent for the time being,” the exchange comments. “The lack of crypto-specific narratives makes this asset class highly reliant on macroeconomic factors to drive performance,” it adds. With this scenario, Coinbase believes that Investors are waiting for the Federal Reserve to act“We do not believe that market players will deploy capital until after the meeting on September 17 and 18,” he says. That is when the next decision on interest rates will be made, as reported by BitcoinDynamic.

According to Coinbase, what is relevant now is not the cuts, but their speed and intensity

With inflation supposedly under control around 3% and the labor market cooling, Powell's new message raises expectations of rate cuts starting in September. For more than a year, these have been at the highest in two decades to calm inflation, so a reduction motivates demand for risk assets. However, for the exchange, rate cuts are not a market catalyst per se, because they can be quite discounted. «The direction of travel for the Fed is clearly a more lax monetary policy,» he clarifies. For this reason, he assures that The relevant question is, rather, the speed and intensity of the transition.. He also stresses that context matters. He clarifies that if the cuts are the result of good inflation management and healthy economic activity, the markets will interpret this constructively. On the other hand, if the Fed is too late to avoid an economic slowdown or a recession, he sees possible harmful effects on prices. “This gives greater importance to the publication of non-agricultural payrolls (NFP) for August scheduled for September 6,” he warns. This report measures the monthly change in the number of people employed in all non-agricultural companies, so it will give signals about the employment situation. Employment is a key indicator of economic health. When companies hire fewer or lay off workers, it reflects a possible decrease in demand for goods and services, which can lead to an economic contraction. Therefore, it is essential to identify a potential recession if it worsens.