Bitcoin (BTC) surged to $65,000 on August 23, reflecting a broader rally in risk assets following significant comments from Federal Reserve Chairman Jerome Powell at the Jackson Hole Symposium. Powell’s hints at a potential rate cut sent the U.S. dollar lower, boosting stocks and sending the S&P 500 close to its all-time high, according to Bitfinex Alpha.
Bitcoin price surge
Bitcoin, which has been underperforming stocks, surged 6.06% in one day, marking its second-largest one-day move since May. The rally came against a backdrop of increasing positive correlations between Bitcoin and U.S. stocks. Until recently, Bitcoin had been relatively weak since hitting its lows in early August.
The price surge also shows a significant increase in the correlation between Bitcoin and stocks, indicating a return of risk appetite in the market. There was also a notable short-term liquidation on August 23, with $40 million in BTC perpetual futures liquidated, and $140 million across all pairs. The decrease in open interest suggests a decrease in leverage in the market, which could lead to more room for price appreciation in Bitcoin and altcoins.
Market Trends
The current funding rates, which are significantly lower than at the beginning of the year, indicate a change in market dynamics. Leveraged traders are taking a more cautious approach despite the overall bullish sentiment. The bullishness is due to recent developments in the U.S. economy, leading to significant changes in monetary policy expectations, labor market dynamics, and business activity.
The Influence of the Federal Reserve System
In a much-anticipated speech at the Kansas City Federal Reserve Symposium in Jackson Hole, Federal Reserve Chairman Jerome Powell hinted at an upcoming adjustment in monetary policy, suggesting that a rate cut is likely. Labor market data contributed significantly to this change in stance, with the U.S. labor market adding fewer jobs than initially reported last year. That downgrade, combined with weaker-than-expected payrolls data for July, has raised concerns about the health of the labor market. Unemployment has hit a post-pandemic high of 4.3%, sparking concerns that the Fed may have delayed cutting rates too long.
But recent data, including weekly jobless claims, show the labor market is in a more controlled downturn.
International cooperation and cryptocurrency market development
Meanwhile, international cooperation to combat cryptocurrency-related crimes is increasing. China has successfully extradited an individual named Zhang from Thailand, who is accused of organizing a $14 billion cryptocurrency pyramid scheme. This is the first extradition of a financial crime suspect under the China-Thailand agreement signed in 2019.
On a positive note, Franklin Templeton has expanded its on-chain money market fund (FOBXX) by integrating with the Avalanche network. This move will allow investors to purchase tokenized stocks, further solidifying the fund’s presence in the blockchain space. The fund, which has already been established on Stellar and Polygon, primarily invests in low-risk U.S. government bonds and aims to leverage Avalanche’s technology to achieve sustained growth.
In another important development, BlackRock’s iShares Ethereum Trust (ETHA) has emerged as the leader in the Ethereum ETF space, becoming the first Ethereum ETF to surpass $1 billion in net inflows. This performance is particularly noteworthy given that Ethereum ETFs have generally seen lower inflows compared to Bitcoin. Grayscale’s ETHE, on the other hand, has seen significant outflows since becoming a public offering, highlighting the competitive landscape within Ethereum investment vehicles.
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