(Kitco News) – Stocks climbed higher in trading on Monday while cryptos struggled to gain momentum as traders await Friday’s comments from Federal Reserve Chair Jerome Powell, who will be speaking from the annual Jackson Hole summit.
Data provided by the CME FedWatch tool shows traders currently price in a 78% chance that the Fed will reduce rates by 0.25% at its meeting in September, but the release on Wednesday of minutes from the Fed's July meeting could change that outlook.
“Looking ahead to the Federal Reserve's upcoming meetings, market probabilities indicate a 78% chance of a 25 basis point rate cut in September, 59% for a 50 basis point cut in November, and 42% for a 75 basis point reduction in December,” said analysts at Secure Digital Markets. In the lead up to Powell’s speech, “traders will closely analyze the minutes from the Fed's most recent meeting, which are set to be released on Wednesday,” they added.
“The month of August began on a volatile note, with disappointing economic data stoking recession fears and triggering a global sell-off,” the analysts said. “This led to the S&P 500 experiencing its worst trading day since 2022 on August 5th. However, positive economic data last week, including encouraging retail sales figures and lower-than-expected initial jobless claims, helped ease market concerns,” leading to the S&P’s best week of 2024.
“Additionally, the annualized inflation rate, as measured by July's consumer price index, reached its lowest level in over three years, further bolstering investor sentiment,” they noted.
“In the FX market, emerging signals reflect the fragility of the global economy. For the first time in over three years, speculators have turned bullish on the Japanese Yen, which is often regarded as a ‘safe-haven’ or ‘risk-off; asset,” the analysts said. “This shift suggests growing caution among investors, as yen strength typically signals apprehension about broader market conditions.”
“Consequently, this increased risk aversion has also impacted risk assets, including cryptocurrencies,” they noted. “The recent pullback in traditional markets has contributed to Bitcoin's decline, with the cryptocurrency falling from approximately $70,000 to $50,000 over eight days leading up to August 5th, before stabilizing around $60,000.”
“Bitcoin remains constrained by its 20-day and 50-day moving averages, a trend that has persisted since the recent market downturn,” the analysts said. “Each time prices approach these resistance levels, sellers step in to drive them lower. A decisive break and close above the $60,000 mark is essential to signal the potential for a recovery. Further, a sustained move beyond $63,000 would likely restore the market to a bullish trajectory.”
BTC/USD Chart by TradingView
For now, Bitcoin bulls are struggling to overcome resistance at $60,000, and at the time of writing, BTC trades at $59,270, a decrease of 0.95% on the 24-hour chart.
At the close of markets, the S&P, Dow, and Nasdaq all recorded gains, finishing up 0.97%, 0.58%, and 1.39%, respectively. Spot gold prices hit a new all-time high of $2,521.00 overnight, but saw minor declines on Monday, down 0.16% and trading at $2,503.90 at the time of writing, while silver is up 1.38% and trades at $29.45.
Bitcoin outlook amid uptick in recession concerns
The global economy finds itself in a delicate balance, oscillating between signs of recession and economic reacceleration,” said analysts at Hyblock Capital. “This uncertainty has given rise to what many are calling a ‘soft landing.’ The Fear & Greed Index, a key barometer of market sentiment, has been swinging back and forth between fear and greed on a weekly basis, underscoring the market's fragile state.”
“In this environment, markets have become increasingly sensitive to any news, whether it’s a minor economic indicator or shifts in political odds,” they noted. “This heightened sensitivity has led to pronounced volatility, with even small changes in data, such as retail sales or housing figures, or the shifting odds in political outcomes like Trump's potential re-election, causing significant market reactions.”
“An example of this was the recent overreaction to the yen carry trade situation, where the majority of market participants suddenly expected an emergency rate cut,” they said.
Hyblock Capital analysts warned that the volatility of last week could continue.
“Last week’s market movements were notably compressed, with the range between the weekly high and low around 10%,” they said. “Historically, such compression is often followed by significant breakouts. The last occurrence of similar market compression led to a 22% and 27% range expansion in the following two weeks.”
“Adding to the potential for increased volatility, both the Binance Volatility Index (BVOL), which measures 30-day implied volatility, and the Deribit Volatility Index (DVOL) have shown upward movement over the weekend – a first in quite some time,” they highlighted.
Open interest has also been steadily climbing since the start of last week, they noted, “which typically signals an increase in potential liquidations and stop losses, further amplifying the likelihood of volatility. One key level to watch is the 57290 - 57340 range, where traders may be trapped. If the price revisits this zone, it could serve as a psychological battleground, with underwater shorts exiting as they hit their break-even points.”
“Despite these short-term uncertainties, the broader outlook remains bullish,” the analysts concluded. “Central banks globally are continuing their easing policies, and there are no significant signs of a credit crisis in the bond market.
TradingView analyst Arman Shaban agreed with Hyblock Capital’s bullish outlook, saying that as long as Bitcoin bulls can hold above $58,700, BTC price should move to challenge higher resistance levels.
“By reviewing the #Bitcoin chart on the weekly timeframe, we can see that the price is currently trading around the $59,500 level,” Shaban said.
“The key level to watch tonight is whether Bitcoin can hold above $58,700,” he said. “In my opinion, Bitcoin is likely to soon rally towards $63,400. However, once it reaches this level, we might see a negative reaction. After observing this reaction, we can better assess Bitcoin's next potential move.”
Mixed start to the week for altcoins
The altcoin market traded mixed on Monday, with a majority of tokens following Bitcoin’s lead lower.
Daily cryptocurrency market performance. Source: Coin360
Sui (SUI) was the top gainer, increasing by 7.2%, followed by a 6.3% increase for Wormhole (W) and a 6.1% gain for Aave (AAVE). Popcat (POPCAT) led the losers with a decline of 8.3%, while Gravity (G) fell 6.3%, and SATS (1000SATS) lost 6%.
The overall cryptocurrency market cap now stands at $2.09 trillion, and Bitcoin’s dominance rate is 55.8%.
