The crypto market has lost significant capital since Friday after Powell maintained a hawkish stance during his speech at the Jackson Hole Symposium last Friday.
Speaking on the Fed’s outlook towards inflation on Friday, Powell stated that the Fed must show firm resolve in fighting inflation by continuing to raise the interest rate and ensuring to keep them at higher levels until it becomes clear from the available data that inflation has been contained; not minding if the unemployment rate rises to new records and the economy slows down during this period.
In his words: “We will keep at it until we are confident the job is done.”
The initial submissions stem from his convictions that the Fed’s failure to restore price stability using the available tools will cause more pain to sanitisers than the current economic hardships. His exact words were: “Without price stability, the economy would not work for
He, therefore, maintained that the FOMC will continue with its aggressive interest rate hike with a more surprising rate than it ever did during their next September session, but will first look at the data available before deciding on the new rate to proceed with.
Consequently, a large amount of capital, up to $72 billion, has been pulled out of the crypto market by investors from last week up to the present.
Crypto market capitalization fell below one trillion dollars once more, remaining at $979 billion.
Bitcoin crashed massively, losing more than 8% of its value from last Friday to create a new low of $19580. Ethereum, too, and every other cryptocurrency that suffered the same fate,
The dip has been carried over into the new week, with Bitcoin still found below 20K during the Asian session today. Ethereum is currently below $1500, with prices ranging from $1,436 during the Asian session today. Binance Coin (BNB) has been pushed below the $300 support level to a new low of $271. During the Asian session today, Cardano (ADA), Stellar Coin (XLM), Uniswap (UNIUSD), Polkadot (DOTUSD), Bitcoin cash (BCHUSD), and every other altcoin were seen trading below their support levels.
All eyes are currently on the NFP report this week, which will give the general outlook of the US economy and influence the Fed’s decision during their next session in September.
How will the NFP report affect the price of cryptocurrency this week?
Amidst the current dip that has befallen the crypto market from last week up to the present moment, the NFP report is currently the critical economic data that investors and analysts are eagerly awaiting to help them make further predictions on the rate of the interest rate hike they expect from the Fed in September.
Despite the Fed’s determination to keep raising interest rates despite all odds, Powell acknowledged that the committee would first look at the economic data available to determine the rate for each round of interest rate hikes.
The NFP report is important data closely watched by the FOMC while deciding on the rate of the new interest rate hike to adopt. This is because the NFP report provides valuable insights into the labour market’s strength to withstand the new rate of an aggressive interest rate hike. The NFP data measures the unemployment rate. A very high increase in the US unemployment rate signals a fragile labour market which may not be able to sustain excessive interest rate hikes without a ripple effect. In this case, the Fed will have to slow down on its rate of an interest rate hike.
On the contrary, a reduction in the unemployment rate from the NFP report lends more support to the Fed to continue with higher rates of an aggressive interest rate hike.
Consequently, higher readings from the NFP report signalling an increase in the unemployment rate might cause the Fed to slow down on its rate, while lower readings signalling a reduction in the unemployment rate will further give the Fed more confidence to hike the interest rate more aggressively.
Forecast for Bitcoin and altcoins ahead of this week’s NFP report
Bitcoin prices have broken below the support at $20,400 and the 20K psychological school level. The next significant support for Bitcoin is seen at $19,250. A break below this level could lead to a lower support level at $18,600. While we expect these levels to hold for the rest of the week, a break below them will spell the end of Bitcoin. This means we can witness a free fall to $13,617.
On the contrary, should the current level hold, we can expect a gradual recovery, with the next resistance seen at $21,828. A break above it could trigger more upside, with the target at $22,542.
On the other hand, altcoin cryptocurrencies, including Ethereum, BNB, ADA, DOT, BCH, etc., will be expected to follow the same direction as Bitcoin ahead of the NFP report on Friday.
Above all, substantial volatility is expected from the crypto market this week, and traders are advised to use proper risk management in taking positions in the market this week.
