Markets
Crypto Market Forecast for Q3 Amid Bitcoin Selloffs and Fed Rate Cuts
Monetary baseIn his weekly market commentary, he noted that the third quarter started on a sour note with oversupplies generated by indiscriminate demand Bitcoin selling from sources such as the German government. Although the size of the Bitcoin selloff was not large compared to BTC’s daily spot volumes, it did put pressure on Bitcoin prices.
However, today the German government emptied all of its Bitcoin, suggesting that some of the market distortions should soon dissipate.
Will everything go smoothly or is there more trouble ahead?
Uncertainty Looms Over Mt. Gox Refunds
THE Mt. Gox Incident Refundsthat began on July 5, have also impacted markets. The extent to which the repaid BTC are being sold remains unclear. Coinbase points out that this uncertainty is more damaging to the market than actual sales, as the largest creditors are likely covered. Concerns about the potential for a U.S. recession by the end of the year or early 2025 remain, adding to the volatility of the market.
Recognizing the current economic landscape, Coinbase notes substantial evidence of a slowdown in the U.S. economy. It believes the economy peaked in Q2 2024 and expects the Federal Reserve to cut interest rates starting September 18.
The latest Consumer Price Index (CPI) data for June, showing a monthly change of -0.1% and a year-on-year change of 3.0%, fell below the average forecast, supporting a more dovish stance by the Fed.
Potential market impacts of rate cuts
Coinbase warns that rate cuts may not be bullish for markets if there are fears of a more significant slowdown. Retail investors may hesitate to take new positions in stocks or cryptocurrencies if the U.S. economy enters a recession. Conversely, if the economy remains relatively strong and the Fed cuts rates, it could unlock more liquidity and attract retail participation. The upcoming U.S. elections in November also present the possibility of fiscal expansion, potentially boosting Bitcoin as an alternative to traditional financial systems.
Rough waters await us!
Looking ahead, Coinbase expects volatile price action in Q3 2024, as cryptocurrency markets lack solid narratives. For example, the market is undecided whether a potential ETH Spot ETFs will be bullish or bearish. This uncertainty could be beneficial, leaving room for surprising outperformance.
Ethereum Roadmap
The seventh Ethereum Community Conference highlighted critical technical topics, including layer-2 (L2) scaling, ETH staking issuance, and cross-chain interoperability. Discussions and panels, including a keynote by Vitalik Buterin, reaffirmed Ethereum’s commitment to being a maximally decentralized and secure layer-1 (L1) settlement layer for various L2s.
Read also: Cryptocurrency Market Analysis: Is the Bear Race Finally Over?
While challenges remain, Ethereum’s focus on scalability paints a bright picture for its future.