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The crypto market has taken a challenging start in August. Last week, Bitcoin prices fell sharply, falling below the $117,000-120,000 range established since July 11th. Bitcoin fell nearly 4% in a week, while some altcoins fell more than 15%.
First, by Powell, the NFP was second
Last week’s decline unfolded in two major phases. One reason was the remarks made by Federal Reserve Chair Jerome Powell following the Federal Open Market Committee (FOMC) meeting held in July on Wednesday. The market was highly anticipated for interest rate cuts in September after a pause in July, but Powell poured cold water into these expectations.
Powell said the possibility of interest rate cuts in September is still uncertain. While acknowledging the signs of a possible recession, he explained that it would be reasonable to stabilize the fees as the inflationary effect of the tariffs has not yet been confirmed.
He also emphasized that the labour market is solid and almost balanced, urging it to move from employment to inflation risk.
Interestingly, the Fed had strong internal opposition to this view. Gov. Christopher Waller noted that private sector employment growth has declined significantly. Despite surface-level health, data revisions reveal weakness and encourage calls for preemptive speed reductions.
For now, Powell’s perspective is consistent with the majority within the Fed, and the market must ease expectations for interest rate cuts in September. Bitcoin prices have dropped to $115,800.
Non-Agricultural Payroll (NFP) data was released on August 1, with a second drop. Wall Street analysts’ estimates for the NFP in July were around 110,000, but the actual figure was 73,000. This contradicts Powell’s optimistic outlook, indicating significant degradation in the US labor market.
More concern was a major downward revision of the May and June data with 258,000 employment. The first strong June NFP figures of 147,000 were mostly statistical fantasies. The U.S. Bureau of Labor Statistics revised its June figure to 14,000, bringing it to 19,000 from May. This is the lowest in five years.
The official unemployment rate was 4.2%, consistent with forecasts, but the broader U-6 unemployment rate reached 7.9%, the highest since the Covid-19 crisis. The number of long-term unemployed people and those seeking work for more than 27 weeks has also deteriorated. These indicators of a sharp economic downturn and labor market weakness have entered the US stock market. Bitcoin also retreated to around $112,000 that day.
A slump in macros drags corporate purchases and ETFs.
Throughout the week, major macroeconomic trends appeared to be dragging the crypto industry. Inflows to spot-listed ETFs that driven Bitcoin and Ethereum prices during July have dropped significantly since July 30th.
The Ethereum Buying company, which was the main driver of Ethereum’s price rise, also declined. This week started aggressively. Sharplink Gaming confidently announced the purchase and staking of the additional $296 million Ethereum, while Bitmine, led by CEO Tom Lee, claimed that Ethereum had an intrinsic value of $60,000.
Standard Chartered Bank predicts that companies buying Ethereum will hold about 10% of their total supply, with a strategic accumulation of over $10 billion, or a 50-fold increase in just four months.
However, these companies were powerless against price crashes later in the week. Ethereum fell 7.2%, and shares in top Ethereum holding companies Sharplink Gaming (-30.80%) and Bitmine (-23.16%) also fell sharply.
Considering this situation, the bearish feelings spread naturally. Bitmex founder Crypto Influencer Arthur Hayes bearish predicted major cryptocurrencies. He predicted that Bitcoin could drop to $100,000 and Ethereum to $3,000. Hayes cited the upcoming US tariff law and slow global credit expansion as a major factor.
Over the weekend, on-chain data attracted attention regarding Ethereum metrics. The accumulation rate of Ethereum Holder fell to 27.57%. This is the lowest in two months. This indicates that investors are no longer actively increasing their ETH holdings.
The US stock market is important
Amid this sharp decline, the warm momentum that had been in July suddenly faded. What will be the future of crypto prices this week? What’s important is whether the US stock market can recover from the shock of NFP data revisions.
The U.S. Bureau of Employment Statistics has a history of revising annual non-farm salary data with over 800,000 jobs last year. It was revealed that these employments did not actually exist despite prior reports from the previous year. But even that revelation caused no significant stock market volatility.
The sharp drop last Friday was part of a recent smooth hit by the US stock market. The weakening of employment figures provided appropriate triggers for corrections. If the US stock market recovers without further corrections, the crypto market could bounce back as well.
However, if further revisions continue, Powell’s comments denying the September rate cuts will be important despite strong US employment. CME Group’s FedWatch tool has already predicted three rate reductions within a year.
While major macroeconomic issues are not expected this week, US employment remains a key focus. The conference committee released an index of employment trends on Monday, with the data potentially having a major impact on the U.S. stock market.
I hope readers will continue to invest in this week as well.
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