Bitcoin price analysis: Powell's speech, Fed policy, and BTC's next move

Why you should read this report

• What do the FOMC minutes and jobless claims signal for the Fed's next moves?
• Powell's Jackson Hole speech: Will it align with market expectations or throw a curveball?
• The $DXY and US 2Y Bond Yield: Short-term fluctuations or long-term trends?
• Crypto market outlook: Why is conviction increasing despite recent consolidation?
• BTC price action: What does the zoomed-out chart reveal about potential future movements?

Disclaimer: This is not financial or investment advice. You are responsible for any capital-related decisions you make, and only you are accountable for the results.

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FOMC minutes yesterday and Jobless Claims today

The key takeaways from the FOMC Minutes that came out yesterday were that some voting members were willing to begin cutting Interest Rates at the July Fed Meeting, and nearly all members will be willing to begin cutting Interest Rates at the September 18th Fed Meeting, assuming the data continues to come in on-trend. 

Jobless Claims came in just over an hour ago, and they came in at a consensus of 232k. Again, this shows that the labour market is still holding up and that there are no material signs of cracking as of yet—this is positive for growth and, therefore, for risk assets.

Powell and Jackson Hole

As stated above, last night's FOMC Minutes mentioned that the "vast majority" of Fed members were open to an Interest Rate cut at the September Fed Meeting. Therefore, we expect Powell to be dovish tomorrow and guide us towards that first interest rate cut.

However, we don't expect Powell to indicate whether the Fed is considering doing a 25bps or 50bps Interest Rate cut at September's Meeting. Powell and the Fed like to keep optionality and are not committing to 25bps or 50bps, which allows Powell to maintain optionality. 

It also wouldn't make sense for Powell to be overly committed to 25bps or 50bps for September when jobless claims have become increasingly important in recent weeks (and we still have many weeks of this data point between now and September's Meeting). 

Alongside this, Jobs data are due out on September 6th—this is between Jackson Hole tomorrow and the Fed's September Meeting on September 18th. So, the Fed won't want to commit to 25bps or 50bps until they see how these data points come in. 

Going into Jackson Hole tomorrow, one thing to consider is that the market is quite dovish. The market is currently priced for 4 Interest Rate cuts in 2024, so that would be 50bps in September, 25bps in November, and 25bps in December. This is too dovish, in our opinion, and we're expecting just 25bps of cuts at each meeting for the remainder of the year. 

Therefore, in the short term, it's possible that the $DXY and the US2Y Bond begin to price this in, especially if Powell isn't as dovish tomorrow as the market expects—he'll still be dovish, but markets move based on how something is against current expectations. In the short term, this might lead to the $DXY rising slightly before continuing in its longer-term downtrend in September. This might provide a very short-term headwind for risk assets.

$DXY 1D Chart:

The same goes for the US 2Y Bond Yield. In our update on 13/08/24, we suggested that the US 2Y Bond Yield might retest slightly higher, and that could have been a headwind for risk assets in the short term. 

Following that update, that's exactly what we got. If Powell is less dovish than the market is currently expecting, then the US 2Y Bond Yield might move back up to 4.10% to $4.15% again. However, we still believe that the $DXY and the US 2Y Bond Yield will trend lower over the coming quarters and that that'll be a major positive for risk assets. 

In the short term, we see it as possible that both rebound slightly higher before continuing their downtrend. 

$US 2Y Yield 1D Chart:

Cryptonary's take

It's very easy to get caught up in the noise. Whether it's 75bps or 100bps of Interest Rate cuts this year, the Fed is going to cut rates in an economy that's still doing pretty well and that has a labour market that is still holding up. 

This is a bullish setup for risk assets, generally speaking. 

If we then look at the crypto side, the catalysts are:

• Crypto is coming out the other side of a huge supply overhang, which it has absorbed well.
• The leverage market has substantially reset. OI is down considerably, and funding rates keep flipping between positive and negative.
• Long-term holders are holding on to supply rather than selling it, which they were a number of months back.

We still see August being somewhat slow and the market taking its time getting into September before it begins gearing back up again. Even though the market has been relatively flat and consolidated for a number of months now, our overall conviction has increased. 

September can be good, and we think it will be, but let's say you get the remainder of August and then September out of the way; we would expect October and November to be very bullish for crypto, particularly if Trump's odds of winning begins to increase again - we think it does. So, don't look too much in the short-term (the next 2-6 weeks), but begin to think and plan beyond that to October onwards. 

We think the markets will be substantially higher in October. So, in the meantime, we keep adding to and building positions in the barbell strategy plays: BTC, ETH, SOL, WIF, and POPCAT.

We'll re-share our zoomed-out BTC chart that we updated a few weeks ago. We've exercised patience, but it's likely that the period of patience we've been is coming to an end in the coming weeks. 

*Note: I am unsure about the Yellow box price action, but I believe Green will be right. It will be range-bound and then substantially higher from October onwards.

BTC: