(Kitco News) – Asset prices trended higher in early trading on Wednesday as market watchers continued to monitor the state of the U.S. economy following the Fed’s surprise 50-basis point interest rate cut, which some took as a sign that the central bank is worried about a recession.
With the latest consumer confidence reading coming in weak, all eyes are now on Thursday's second-quarter GDP print and Friday's reading on the PCE index – the inflation gauge favored by the Fed – which could provide clues as to the Fed’s next move.
“Yesterday’s gains came despite weak data on Consumer Sentiment which dropped to 98.7, well below the 103.9 expected,” said David Morrison, senior market analyst at Trade Nation. “Things get more interesting tomorrow when there’s weekly Unemployment Claims, Durable Goods, an update on GDP and speeches from a handful of FOMC members, topped off by the Fed Chair himself, Jerome Powell. Friday sees the release of Core PCE, the Federal Reserve’s preferred inflation measure, which came in at 2.6% last month, still somewhat above the Fed’s 2% target.”
Concerns have been heightened by the fact that the effect of China’s efforts to support markets with a massive stimulus package has begun to fade amid growing skepticism that the measures taken will be able to turn around the world’s second-largest economy successfully.
“For now, investors seem to be taking advantage of the ‘Goldilocks’ scenario, whereby they can enjoy looser monetary policy against a broadly positive economic backdrop,” Morrison said.
Data provided by TradingView shows that Bitcoin (BTC) bulls made another attempt to overtake resistance at $65,000 in the early hours of Wednesday but were stopped short by bears at $64,823, who then reversed course and dropped King Crypto back to $63,310.
BTC/USD Chart by TradingView
At the time of writing, BTC trades at $63,858, an increase of 0.93% on the 24-hour chart.
“The crypto market rose 1.2% in 24 hours to $2.25 trillion, approaching the highs set exactly one month ago,” noted Alex Kuptsikevich, senior market analyst at FxPro. “New highs could attract more buyers and signal a break in the multi-month downtrend. The sentiment index rose to 59, the highest since late July, which looks like the optimal range for further gains. It is far from extreme greed, which signals overbought conditions, and fear-selling is behind us.”
“Bitcoin hit a new monthly high of [$64.8K] early on Wednesday but has since pulled back around $1000 - a common pattern of late,” he added. “The first cryptocurrency has been struggling to find equilibrium near the highs of late last month and near the 200-day moving average. It will take new data and momentum to tip the price out of equilibrium. There is a risk that short-term gains in risk appetite on policy easing in the US and China will fade.”
While Kuptsikevich is looking for new data to reignite Bitcoin’s momentum, analysts at Altindex noted that the “sentiment around Bitcoin has seen a notable shift,” with their sentiment data showing “that after hovering around neutral for weeks, sentiment has surged to 83 on a scale of 0 to 100, indicating very positive sentiment in the market.”
“This positive outlook is echoed by industry voices such as hedge fund manager Anthony Scaramucci, who recently suggested that the combination of the Fed’s rate cut and increasing regulatory clarity in the US crypto space could propel Bitcoin to new record highs,” they noted.
Altindex also highlighted that “Google search trends for Bitcoin are starting to climb, hinting at growing interest in the cryptocurrency. This uptick in searches could be an early sign of a new bull cycle, as more investors turn their attention back to Bitcoin in response to the changing economic landscape.”
“For investors, the Fed's rate cut signals a more favorable environment for higher-risk assets like cryptocurrencies,” they said. “Historically, lower interest rates tend to drive demand for such assets, as they offer the potential for higher returns compared to traditional investments like bonds. Bitcoin, often dubbed 'digital gold,' appears to be benefiting from this renewed appetite for risk.”
“As the market digests the Fed’s rate cut and its broader implications, all eyes will be on Bitcoin to see if this rally can be sustained,” they concluded. “For now, the combination of a favorable macroeconomic backdrop and positive market sentiment suggests that Bitcoin might be poised for further gains in the near future.”
