The cryptocurrency market experienced another significant decline today, continuing the downward trend that has been ongoing for the past few weeks. Bitcoin (BTC) fell 1.5% to $57,800, while Ethereum (ETH) fell 3% to $2,442, its lowest level since early February.
This decline occurred just 90 minutes after U.S. stock markets opened following the Labor Day holiday.
The decline in cryptocurrency values followed a broader sell-off in the stock market, with the Nasdaq Composite Index down 2.4% and the S&P 500 down 1.5%. The market decline was partly due to disappointing economic data. The ISM Manufacturing PMI for August came in at 47.2, slightly below expectations of 47.5, suggesting continued contraction. The report also highlighted a worrisome mix of falling new orders and rising prices, raising concerns about potential stagflation.
Investors have been increasing their bets that the Fed will cut interest rates more aggressively in the face of weaker-than-expected economic data. The probability of a 50 basis point cut in September rose to 39% from 30% the day before, according to CME FedWatch. However, the majority of market participants still expect a 25 basis point cut, with 61% holding the odds.
Attention now turns to Friday’s August jobs report, seen as a key indicator that could influence the Fed’s decision. Economists are forecasting a pick-up in job growth, with an estimated 160,000 new jobs after a weaker-than-expected 114,000 in July. The unemployment rate is also expected to ease slightly to 4.2% from 4.3%.
The recent declines in Bitcoin and Ethereum follow a nearly 10% drop for BTC in August. Hopes for a September recovery may be premature, according to Alex Thorn, head of research at Galaxy Digital. Thorn noted that BTC has historically struggled in September, falling in seven of the last decade. However, he also noted that October has traditionally been one of the strongest months for BTC, offering some hope for a potential recovery later in the fall.
*This is not investment advice.