Impact of Economic Factors on Cryptocurrency Market

Cryptocurrencies are currently facing a downturn, causing concern for altcoins as volatility rises. The recent weekly report highlighted an expected increase in volatility by the end of the week, and this prediction has come to fruition, hinting at potential further consequences ahead.

Reasons Behind Bitcoin's Decline

The recent decline in Bitcoin's value can be attributed to uncertainties surrounding the actions of the Federal Reserve (Fed). If the Fed fails to address inflation effectively, it is likely to maintain higher interest rates for an extended period, with the possibility of further rate hikes. The unexpected 0.4% monthly wage growth and the Non-Farm Payroll report, surpassing expectations by approximately 100,000, have disrupted market dynamics. Investors who were anticipating a lenient approach based on JOLTS data were caught off guard by the announcement of 272,000 non-farm payroll additions compared to the expected 180,000.

Consequently, Bitcoin (BTC) experienced a significant drop of nearly $1300 as of the latest update. The likelihood of a rate cut in September has decreased from 70% to 55%, as indicated by FedWatch data. This substantial reduction in the probability of a rate reduction during the upcoming Fed meeting in about five days underscores the pessimism surrounding the most recent economic indicators.

Future of Cryptocurrencies

There is a high probability that Bitcoin's price will rapidly descend to $68,500 after facing resistance at $71,800. If this scenario unfolds, the recent gains seen in altcoins are expected to reverse, potentially leading to a correction. For instance, Binance Coin (BNB) may test the $635 resistance level after reaching $700. Additionally, altcoins that recently experienced double-digit gains could see these profits diminish rapidly.

If US markets open negatively in the near future, the adverse impact on cryptocurrencies is anticipated to intensify, signaling further challenges and downside risks for investors.

Key Considerations for Investors

• Be vigilant about Fed announcements to gauge potential interest rate adjustments.
• Prepare for the possibility of swift declines in both Bitcoin and altcoin prices.
• Safeguard investments through diversification or the use of stop-loss orders.
• Stay updated on economic indicators such as wage growth and employment reports to make informed decisions.

The continuous flow of economic data continues to exert notable pressure on the cryptocurrency market, fostering an environment of heightened risk and uncertainty for investors.