Markets
Bitcoin Fails to Recover from Dovish FOMC Meeting: Why?
- BTC failed to recover despite the dovish FOMC meeting on July 31.
- Friday’s July employment report could add to the volatility and set the next direction for BTC price.
Bitcoin [BTC] pulled away from U.S. stocks following the dovish FOMC meeting on Wednesday, August 1, falling below $65,000 as stocks hit record highs.
As expected, the Fed kept interest rates unchanged at its last meeting, but Chairman Jerome Powell signaled a likely rate cut in September.
At press time, interest rate traders are now pricing in 86.5% chance of a cut in September, an overall bullish signal that boosted U.S. stocks.
Source: CME Fed watch tool
So why has Bitcoin not followed the rally in US stocks, despite the dovish Fed announcement?
Galaxy’s Mike Novogratz accuses US government
Mike Novogratz of Galaxy Digital agreed that the US government could be the market risk factor. He argued that the US could sell Bitcoin for political reasons after Trump announced he would create a strategic reserve.
“I agree, it looks like someone is leaning on $BTC. I have no idea, but it could be the US Marshal’s office. They answer to the DOJ… I wish they weren’t selling.”
QCP Capital reinforced a similar market caution related to the US government movement of $2 billion in BTC last week.
“The recent move of 30,000 BTC from Silk Road by the US government has introduced uncertainty into the cryptocurrency market.”
As a result, QCP Capital predicted that BTC could remain range-bound after failing to break out of the $70,000 high.
That said, the next major market driver could be the July 2024 U.S. employment report, which will be released on Friday (August 2).
Based on previous employment reports, fewer additional employment scenarios corresponded to a rally for BTC, as they reinforced the cooling US labor market and supported the likely possibility of a rate cut by the Fed.
Source: BTC/USD, TradingView
A similar scenario played out in the April Jobs report, released on May 3, which predicted a BTC rally of around 6%.
However, subsequent employment reports released in June and July sent BTC lower after showing an improvement in US labor markets.
So, a cooler Jobs report on Friday could push BTC to reverse its recent losses. However, a warmer Jobs report with more job additions could drag it further towards the bottom of the range.
Quinn Thompson of crypto hedge fund Lekker Capital shared same outlook. While acknowledging how crucial Friday could be for markets, he maintained a positive outlook for the second half of 2024.
“I remain positively oriented towards the medium-term macroeconomic outlook (H2 2024). I expect tomorrow’s FOMC and Friday’s NFP to be the two most important events of the week.”
At the time of writing, BTC was trading below $65,000 and could recover from the short-term support near $65,000, marked in blue, only if the Jobs report favors the bulls.
Thus, macroeconomic factors and US politics continue to influence the BTC price and it is worth monitoring these fronts for risk management.