Key Takeaways
Why is crypto seeing big flows despite macro uncertainty?
Delays in key US data and October seasonal winds have funneled billions into crypto, with BTC hitting $125,000 as the market fronts potential Fed rate cuts.
How do the dollar and bond markets impact crypto?
A stronger USD tightens liquidity, making risky assets more expensive, while money flows into US Treasuries. The $90 billion crypto sell-off reflects these flows ahead of Powell’s post-shutdown conference.
US traders are waking up to shaky macro momentum.
The next FOMC is just 20 days away, but updates are scarce during the federal shutdown. The background is already trending towards moderate interest rate cuts. Bitcoin [BTC] breaking into an ATH further reinforces this setup.
However, Fed Chairman Powell will release his first conference after the shutdown, and the market is clearly on edge. Traders are wondering whether his tone will reinforce a rate cut narrative or not.
September FOMC Minutes: What Traders Need to Know
The Fed recently issued highlights from the September minutes.
The report highlighted weaker than expected employment numbers. According to ADP32,000 jobs were lost in September, increasing pressure on the Fed to consider rate cuts despite a 0.2% rise in inflation. The report emphasized,
“Short-term expectations for policy rates had fallen in response to weaker-than-expected employment data and the apparent increase in downside employment risks.”
It was further stated,
“Nearly all Desk survey respondents expected a 25 basis point cut in the target range for the federal funds rate at this meeting, and about half expected an additional cut at the October meeting.”
In short, the Fed is not on the defensive: half of its members agree with a rate hike in October. All eyes are now on the Community Bank Conference, where analysts will assess the impact of the shutdown on banks.
According to AMBCrypto, the impact will be crucial in mapping the US macro cycle and, more importantly, in gauging potential flows into the crypto market, which has been closely monitoring macro trends lately.
Crypto investors look to the Federal Reserve for direction
Crypto investors are closely watching the potential US government shutdown and paying attention to its impact on market sentiment and regulatory developments.
In addition to the typical seasonal winds in October, delays in key economic figures (CPI, PPI and employment figures) have diverted more than $300 billion to the economy. crypto marketwith BTC reaching an all-time high of $125k.
In short, the market has “fronted” the October rate cut story against persistent employment risks. The question now is: will the Fed deliver? That’s why US traders are waking up to a major macro boost.
Source: TradingView (DXY/USD)
It is striking that the US dollar (DXY) is regaining strength and breaking the 98 wall.
Simply put, a stronger dollar means tighter liquidity, making USD-based transactions more expensive and putting pressure on risky assets like cryptocurrencies. Bonds, especially US government bonds, are absorbing flows to safe havens.
This is supported by the interest rate on ten-year government bonds decreased below 4.15%, indicating a money back rotation. So this week’s $90 billion crypto hemorrhage isn’t random, making the Fed’s conference an important guiding read.