BTC continues its fourth wave of gains after a surge amidst hopes for a rate cut

Author: 0xWeilan

Affected by the US economic and employment data, the expectation of restarting interest rate cuts is uncertain, the inflow and outflow of main pricing funds are uncertain, coupled with cross-cycle long-term selling and on-site fund rotation,

In August, the US capital market was primarily driven by the oscillation between three key variables: economic and inflation data performance, expectations of when the Fed will resume rate cuts, and concerns about Fed independence. The overall market trend was initially cold, then hot, and then cold again.

On August 1st, employment data was released. The US unemployment rate rose month-over-month in July, and non-farm payrolls increased by 73,000 jobs, far below the previously expected 100,000. At the same time, the U.S. Bureau of Labor Statistics significantly revised downward its data for May and June, with the June figure revised by over 90%. Following the release of this surprising data, the Nasdaq plummeted 2.24% that day, with Bitcoin (BTC) following suit, falling 2.17%. Influenced by the data, FedWatch showed that the probability of a 25 basis point rate cut by the Federal Reserve in September rose sharply to 75.5%, up from 37.7% the previous day. The US dollar index plummeted by 1.23% that day and continued its downward trend. This data rekindled market expectations of a September rate cut, leading to a continued upward trend in US stocks and Bitcoin. BTC reached a record high of $124,533.00 on August 14. On August 12, the US CPI data released was in line with market expectations and had no significant impact on the market. However, the market, which had fully priced in the rate cut, remained highly sensitive to inflation data. On August 14th, the PPI data was released, showing an annualized growth of 3.3%, significantly exceeding market expectations of 2.5%. Concerns that rising production costs would eventually be transmitted to consumers initially dampened market expectations for interest rate cuts. After hitting a record high, BTC began to decline, continuing its decline until the end of the month. During the same period, the tech-dominated Nasdaq began to weaken, with funds shifting from highly valued tech stocks to cyclical and consumer stocks, and the Dow Jones began to strengthen. This suggests that expectations for rate cuts have not been shattered, but rather downward adjustments have been made, prompting investors to seek out assets with safer valuations. On August 20th, at the Jackson Hole Global Central Bank Conference, Federal Reserve Chairman Powell delivered his most dovish tone yet this year, suggesting a greater focus on the cooling job market and the possibility of rate cuts to boost its recovery. Markets were reassured, with traders pricing in a probability of a September rate cut exceeding 70% until the end of the month. The core PCE data released on August 29th, while largely in line with expectations, showed an annualized increase of 2.9%, the highest since February 2025, indicating a slight increase in underlying inflationary pressures. All three major US stock indices fell in response, but the Dow Jones Industrial Average's decline was significantly smaller than that of the Nasdaq.

U.S. PCE index annual rate

As of the end of the month, the market had fully priced in