Key Points
- Bitcoin retested $66k following favorable August inflation data.
- U.S. labor market updates could influence the next market direction.
- Core PCE Index showed a YoY increase of 2.6%, better than expected.
- Speculators anticipate a potential 50 bps Fed rate cut in November.
- Upcoming labor market indicators include JOLTs, ADP, and unemployment rate.
- Strong labor market performance could push BTC towards $70k.
- Ethereum could also benefit, potentially reaching $3000.
- U.S. BTC ETFs saw significant inflows, indicating renewed investor demand.
Bitcoin’s Resurgence
Bitcoin [BTC] experienced a notable surge, retesting the $66k mark following the release of better-than-expected August inflation data. The Core PCE Index, a key measure of U.S. inflation that excludes volatile food and energy prices, reported a year-on-year increase of 2.6%, slightly below market expectations of 2.7%. This softer inflation reading provided a boost to the markets, as it suggested a more favorable economic environment.
The positive inflation data led speculators to price in higher odds of a 50 basis points (bps) rate cut by the Federal Reserve in November. This anticipation of a rate cut further fueled optimism in the market, contributing to Bitcoin’s upward momentum. The retest of $66k marked a significant milestone, reflecting the cryptocurrency’s resilience and potential for further gains.
Market Catalysts and Labor Market Focus
With inflation data showing signs of moderation, the Federal Reserve’s focus is now shifting towards the U.S. labor market. The upcoming labor market updates, including the Job Openings and Labor Turnover Survey (JOLTs), ADP employment report, and the unemployment rate, are expected to play a crucial role in determining the Fed’s next moves. These indicators will provide insights into the health of the labor market and guide the Fed’s decisions on interest rate adjustments.
Trading firm QCP Capital highlighted the importance of these labor market indicators in their weekend brief, noting that strong performance in these metrics could bolster the case for a 50 bps rate cut in November. Such a move would likely propel risk assets, including Bitcoin, even higher. The potential for BTC to edge towards $70k is becoming increasingly plausible, especially if it reclaims the 200-day moving average, signaling a bullish market structure shift.
Ethereum’s Potential and Investor Demand
Ethereum [ETH] has also been showing impressive performance, outpacing Bitcoin since the Federal Reserve’s pivot. The favorable macroeconomic conditions could provide an additional tailwind for ETH, potentially driving its price towards the psychological level of $3000. Market analyst Benjamin Cowen has suggested that Ethereum’s remarkable recovery on the charts could continue, supported by strong investor demand and positive market sentiment.
The renewed demand for top digital assets is evident in the significant inflows into U.S. BTC ETFs. This week, BTC ETFs saw $1.11 billion in inflows, the largest weekly inflows since July. Similarly, ETH ETFs attracted $84.6 million in inflows, the highest weekly demand since August. These inflows indicate a growing appetite among U.S. investors for digital assets, further supporting the bullish outlook for both Bitcoin and Ethereum.
Conclusion
The recent retest of $66k by Bitcoin, driven by favorable inflation data and the anticipation of a potential Fed rate cut, highlights the cryptocurrency’s resilience and potential for further gains. The upcoming U.S. labor market updates will be crucial in determining the next market direction, with strong performance in these metrics likely to propel BTC towards $70k. Ethereum, benefiting from similar macroeconomic conditions, could also see significant gains, potentially reaching $3000. The renewed investor demand for BTC and ETH ETFs underscores the growing interest in digital assets, supporting a positive outlook for the crypto market.
