Fed Rate Cut Expectations Heat Up, Bitcoin Sinks Below $54,000, US Stocks Struggle

Fed Rate Cut Expectations Heat Up, Bitcoin Sinks Below $54,000, US Stocks StruggleAccording to Coinglass data, Bitcoin has plunged over 4%, falling below $54,000. Over the past 24 hours, over 86,000 cryptocurrency traders have liquidated their positions

Fed Rate Cut Expectations Heat Up, Bitcoin Sinks Below $54,000, US Stocks Struggle

According to Coinglass data, Bitcoin has plunged over 4%, falling below $54,000. Over the past 24 hours, over 86,000 cryptocurrency traders have liquidated their positions. The Fed's current loose monetary policy is generally considered beneficial for speculative assets like cryptocurrencies.

The Securities Times reported that inflows into US spot Bitcoin exchange-traded funds (ETFs) fueled Bitcoin's surge earlier this year, creating a bull market. However, this upswing didn't last. Recently, investors have started withdrawing funds from Bitcoin ETFs, leading to a decline in Bitcoin's price.

US stocks have also struggled. On September 6th, US stocks suffered a significant drop. Wind data shows that the Dow Jones Industrial Average fell 1.01%, the S&P 500 index declined 1.73%, and the Nasdaq plummeted 2.55%. The "Magnificent Seven" tech giants all experienced losses: Apple dropped 0.70%; Microsoft, with its market capitalization falling below $3 trillion, decreased by 1.64%; Nvidia, Google-A, Amazon, Meta, and Tesla suffered declines of over 4%, 3.65%, 3.21%, and 8.45%, respectively. US stocks have had a rough start to September. This week, the Dow is down 2.93%, the S&P 500 has fallen 4.25%, and the Nasdaq has plunged 5.77%. Gold, silver, and oil have also experienced losses.

Data from the US Bureau of Labor Statistics reveals that US nonfarm payrolls increased by 142,000 in August, falling short of the expected rise of 165,000 and the average monthly growth of 202,000 over the past twelve months. This indicates that the US labor market is softening.

Following the release of the employment report, several Fed officials made statements hinting at their support for a rate cut. Fed Governor Christopher Waller stated that while the labor market is continuing to soften, it hasn't worsened, a crucial factor in their upcoming decisions. He indicated a preference for a 25-basis point reduction initially, but would also consider a larger cut if new data shows a worsening labor market.

New York Fed President John Williams echoed Fed Chair Jerome Powell's remarks from the Jackson Hole Economic Symposium last month, suggesting it's time to loosen monetary policy, but didn't provide specifics on the rate cut's magnitude.

James Bullard, Dean of the Purdue University Krannert School of Management and former president of the Federal Reserve Bank of St. Louis, stated that a 25-basis point cut is likely in September. "While the Fed may be a bit on the back foot at the moment, I don't think it's time to go 50 basis points."

Many analysts warn that the labor market is cooling significantly, and if the Fed is too slow to cut rates, this situation could worsen. Jason Pride, Chief Investment Strategist and Head of Research at Glenmede, a wealth management firm, stated: "The labor market hasn't bottomed yet, but the Fed has enough concerns to seriously consider a September rate cut (of 50 basis points)."

The market has widely anticipated a Fed rate cut in September, with the only remaining point of contention being the magnitude of the cut. After this week's data indicating a weakened US labor market, support for a 50-basis point cut is gaining momentum on Wall Street.

Rising Expectations for a Fed Rate Cut

Statements by several Fed officials, along with recent US labor market data, point towards a rate cut by the Fed in September. While the market widely anticipates a rate cut, there's disagreement about the cut's magnitude. Some analysts believe the Fed should implement a 50-basis point reduction to address the softening labor market.

Bitcoin Falls Below $54,000, Crypto Liquidations Surge

Bitcoin's price has fallen below $54,000, a decline of over 4%. Over the past 24 hours, the cryptocurrency market has witnessed over 86,000 liquidations. This reflects concerns about economic prospects and the market's expectations for a Fed rate cut.

US Stocks Struggle, Tech Sector Takes a Hit

US stocks have had a difficult start to September, with the Dow, S&P 500, and Nasdaq all declining. Tech stocks have performed poorly, with giants like Apple, Microsoft, Nvidia, Google, Amazon, Meta, and Tesla experiencing losses.

Summary

Rising expectations for a Fed rate cut, Bitcoin falling below $54,000, and the struggling start to September for US stocks all reflect concerns about the economic outlook. Investors need to closely monitor the Fed's policy moves and the future direction of the global economy to make sound investment decisions.