US economic data cools, interest rate cut expectations revised down, and the buying power of encryption assets remains strong (08.11~08.17)

The information, opinions, and judgments regarding the market, projects, coins, and other aspects mentioned in this report are for reference only and do not constitute any investment advice.

Written by 0xBrooker

BTC daily chart

BTC opened this week at $119,309.37, closed at $117,488.60, with a low of $116,859.32 and a high of $124,533.00, down by 1.53%, with a volatility of 6.43%, and the trading volume increased.

This week, the US released the CPI and PPI data for July. The CPI data was largely in line with expectations, but the PPI data significantly exceeded expectations, leading to a sudden increase in the expectation that "inflation remains sticky or even rises." Federal Reserve officials began to cool expectations for a significant rate cut in September. The market had previously priced in a 25 basis point cut in September, with some pricing in a 50 basis point cut, but the unexpectedly high PPI data released this week raised inflation concerns and the market quickly eliminated the pricing for a 50 basis point cut.

Affected by this expectation, the US dollar index experienced a certain rebound, but still declined over the week. Originally driven by significant interest rate cuts, US stocks and BTC saw a slight drop due to the data impact, but still recorded an increase over the week.

Currently, a rate cut of 25 basis points on September 25 remains a high probability event, with the US stock market and BTC both showing a gradual upward trend. For the future market, EMC Labs believes it is prudent to be cautiously optimistic, closely monitoring economic and employment data, especially data related to inflation. If the data worsens, the market may continue to experience fluctuations.

Policies, macro finance and economic data

In last week's report, we mentioned that "what needs to be vigilant is that the market's pricing of three interest rate cuts will still face challenges, such as whether the CPI will significantly rebound due to tariff impacts. This significant uncertainty will still make the market's optimistic pricing seem precarious."

The US CPI and PPI data released this week indeed had a certain impact on the market.

The PCI data released on Tuesday showed that the seasonally adjusted CPI year-on-year rate at the end of July was 2.7%, lower than the expected 2.8%, but the seasonally adjusted core CPI year-on-year rate was 3.1%, higher than the expected 2.00%, indicating that inflationary pressures remain sticky, but relatively mild. This data reinforced market expectations for a significant interest rate cut, driving the Nasdaq and BTC to new historical highs.

However, the PPI data released on Thursday showed that the month-on-month rate for July was 0.9%, significantly higher than the expected 0.2%, and the year-on-year rate reached 3.3%, also well above the expected 2.5%. The PPI data is likely to be transmitted to the CPI data in the future, making it possible for inflation data to rise in the coming months.

The unexpectedly high PPI data has led to a certain decline in the US stock market, causing BTC, which had just reached a historical high and was returning to an upward trend, to drop significantly on Thursday. This also resulted in a sharp decline in Altcoins, which were rising after the start of Altseason.

The US dollar index and both long-term and short-term government bonds have experienced some fluctuations. FedWatch data shows that traders quickly eliminated the pricing of a 50 basis point hike in September on Thursday, and the probability of a 25 basis point rate cut in September now exceeds 90%.

Based on expectations of a restart in the interest rate cut cycle, the Nasdaq, which had previously surged, saw its growth slow down, while the Dow Jones and Russell 2000 indices caught up, with gains surpassing those of the S&P 500.

From the data, the market still judges that the interest rate cut cycle will open in September, but the expectations for the magnitude of the rate cut have been adjusted downward. Based on this judgment, the upward trend in the US stock market and the cryptocurrency market remains relatively intact, and a cautiously optimistic attitude can still be maintained moving forward.

Cryptocurrency Market: Capital Inflow and Outflow and Sell-off

After oscillating around the $120,000 line for 4 weeks, BTC attempted to break through this week, reaching a high of $124,533, before plummeting back below $120,000 amid market fluctuations triggered by the PPI data.

However, the increase in risk appetite driven by interest rate cut expectations continues to see abundant capital flowing into the cryptocurrency market.

According to eMerge Engine statistics, the crypto market saw inflows of over $19.8 billion for the entire week, including $6.145 billion in stablecoins, $0.38 billion in BTC Spot ETF channels, $2.394 billion in ETH Spot ETF, $0.509 billion in corporate purchases of BTC, and $2.394 billion in corporate purchases of ETH.

The influx of funds is strong, and the adjustment of BTC is due to a shift in funds, with the scale of inflow into the ETH market far exceeding that of BTC.

Cryptocurrency Market Fund Inflow and Outflow Statistics (Weekly)

As BTC adjusts this week, ETH continues to rise, with a weekly increase of over 5.22%. At the same time, Ethereum ecosystem projects have also recorded significant gains.

In terms of BTC selling, it continues to exhibit characteristics of a rising phase with significant ups and downs. Compared to the robust capital inflow, the selling pressure is not substantial.

cycle indicator

According to eMerge Engine, the EMC BTC Cycle Metrics indicator is 0.75, in an upward phase.

EMC Labs was founded in April 2023 by cryptocurrency asset investors and data scientists. It focuses on research in the blockchain industry and investments in the Crypto secondary market, with core competencies in industry foresight, insights, and data mining. It is committed to participating in the thriving blockchain industry through research and investment, promoting the well-being of humanity through blockchain and cryptocurrency assets.

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