(Kitco News) – Asset prices trended higher in afternoon trading on Wednesday after the release of the minutes from the July Federal Open Market Committee (FOMC) meeting showed that most officials on the board for the Fed favored a September rate cut if inflation continues to cool.
The minutes helped boost sentiment on Wall Street that the first interest rate cut will come in less than 28 days, as the next FOMC meeting is scheduled for September 18. The debate now centers around how big the first rate cut will be, with the CME FedWatch Tool showing the odds of a 50 basis point cut stand at 36%.
Markets and hopes for a rate cut also got a boost after new data from the Bureau of Labor Statistics showed that the U.S. economy employed 818,000 fewer people than originally reported as of March 2024 – a sign that the labor market has been cooling longer than most thought.
While the downward revision was notable in that it was the second biggest on record and the largest in the past decade, as noted by ZeroHedge, some economists were quick to say that the updated data reflects a labor market that is softening but not “rapidly deteriorating.”
After a midday dip into the red, the major stock indices bounced back into the green following the release of the FOMC minutes and trended higher into the close. At the finishing bell, the S&P and Nasdaq were in the green, up 0.42% and 0.57%, respectively, while a dump before the closing bell led to a flat close for the Dow.
Data provided by TradingView shows that Bitcoin (BTC) rallied back above $61,000 amid the rising sentiment surrounding rate cuts, jumping from support at $59,500 to hit an intraday high of $61,865, with bulls looking as though they intend to continue pushing the price action.
BTC/USD Chart by TradingView
At the time of writing, Bitcoin trades at $61,308, an increase of 3% on the 24-hour chart.
Beware the doom posting
While expectations for a rate cut in September are certain, market analyst Bloodgood warned that many would use the opportunity to inject FUD (fear, uncertainty, and doubt) into traders' minds, and investors would do well to try to ignore sensational headlines.
“There’s less than a month to go until the September FOMC, and a cut is essentially guaranteed; the only question is whether it will be 25 bps or 50 bps,” Bloodgood said. “Looking at current implied probabilities from the futures markets, one cut is about twice as likely as two cuts, but there’s no longer any doubt that the long-awaited pivot is finally here.”
“Given that this is happening in the context of really good U.S. economic data (especially retail sales, which came in at a 1% increase, much higher than the 0.4% forecast), it’s easy to see how the S&P 500 managed to rally almost 10%, and the NASDAQ 13%, since the recent low put in by the yen carry trade blow up,” he added.
“As we approach the date of the inevitable cut, you’ll soon start seeing people confidently saying that this is, in fact, a disaster for the markets because a recession often follows the start of a cutting cycle,” Bloodgood said.
“When you see those overconfident takes, keep a few things in mind: first, the way the market will react will depend in large part on whether the cuts are seen as a desperate attempt to fix something that’s badly broken or if they’re seen as a way to stimulate growth after a soft landing,” he noted. “Second, the keyword is often; a recession does tend to follow the start of a cutting cycle, but the probability (if we look at the cutting cycles going back to 1970) is about 60%, not 90%+.”
“Finally, and most importantly, even in the cycles when a recession did happen, the S&P 500 was still higher over the following year most of the time,” Bloodgood noted. “All in all, take the inevitable doom posting with a grain of salt.”
Looking at Bitcoin's weekly chart, Bloodgood said that after two weeks, “the dust has settled, and Bitcoin is in a sort of accumulation zone.”
“Buyers stepped in heavily after Bitcoin crashed, reaching levels below $50k, only to bounce back up to the breakdown level,” he highlighted. “At the time of writing, BTC is accumulating slightly above the aforementioned level without any clear indication of where it might go next.”
“Looking at the bigger picture, we are still seeing a bearish structure, so nothing new here – as long as we don’t make a higher high, there is no hope for continuation,” he said. “Every movement to the upside will be tested at the downtrend line, so make sure you don’t jump in too soon.”
“The ideal plan for long-term longs is a retest of the downtrend line after we break above it,” Bloodgood said. “Anything else feels like gambling to me. There are multiple levels for traders who prefer to trade on the daily timeframe, but keep in mind that we can expect more volatility as summer ends.”
Altcoins on the uptrend
Altcoins largely followed Bitcoin’s lead higher, with 90% of the tokens in the top 200 recording gains on Wednesday.
Daily cryptocurrency market performance. Source: Coin360
A 15.7% gain for Fantom (FTM) was the largest increase on the day, followed by gains of 15.3% and 14.4% for Compound (COMP) and Polygon (MATIC), respectively. Helium (HNT) led the losers with a decline of 4.6%, while cat in a dogs world (MEW) lost 3%, and Sui (SUI) fell 2.9%.
The overall cryptocurrency market cap now stands at $2.15 trillion, and Bitcoin’s dominance rate is 56.1%.
