Cryptocurrency markets enter a week of high volatility ahead of the U.S. Federal Reserve's interest rate decision. Last week, the total market capitalization exceeded $4.17 trillion, but by Monday morning, it had fallen by 1% to $4.13 trillion, according to CoinMarketCap data. Bitcoin, which had reached $116,000, faced resistance and retreated to $115,000, but recovered in Asian trading. Based on The Kobeissi Letter's analysis and expert commentary, three key factors are identified that will determine the crypto market dynamics this week.
The Federal Open Market Committee (FOMC) meeting on September 17 will be a key event. CME futures markets estimate the probability of a 25 basis point rate cut at 96.4%, with a 3.6% chance of a more aggressive 50 basis point move. This is the first cut in 2025 after a pause since December 2024. The Fed is shifting focus to labor market easing, evidenced by the rise in unemployment claims, rather than inflation risks, as noted by The Kobeissi Letter.
Key thoughts: The rate cut is already priced in, which could spark 'sell the news', warns Andrew Tyler, head of market analysis at JPMorgan. Fed Chair Jerome Powell's press conference and the updated Dot Plot published on Wednesday will provide signals on the pace of further easing. If rhetoric turns 'dovish', it will enhance risk appetite, supporting crypto assets. However, an unexpected maintenance of tight policy could pressure Bitcoin and altcoins, especially amid the current resistance level at $118,000.
On Tuesday, the August retail sales report will be released, reflecting consumer sentiment and economic momentum. Thursday will see the release of the Philadelphia Fed manufacturing index and initial unemployment claims data. While these indicators are unlikely to significantly change expectations, they will enhance the focus on macroeconomic uncertainty.
Key thoughts: Labor market weakness, confirmed by the spike in claims, reinforces expectations of policy easing. However, weak retail sales may signal stagflation—a combination of low growth and high inflation. U.S. stock indices, such as the S&P 500, have reached record highs, but household wealth growth (+$7.1 trillion in Q2) is concentrated among the top 10%, increasing inequality. This boosts the appeal of crypto assets as an alternative capital preservation tool, especially amid stagnating traditional markets.
The rise in gold prices (+36% YTD vs. +12% for the S&P 500) underscores investors' interest in safe-haven assets. Nick Rock, director of LVRG Research, notes: 'Crypto assets demonstrate resilience and the ability for long-term hedging against inflation. Aggressive fiscal policy and Fed easing are likely to prolong the crypto cycle into 2026.' Stagflation concerns strengthen the case for alternative assets.
Key thoughts: Historically rare S&P 500 growth (+30% in five months) signals a potential rally (+18.1% over the next 12 months, according to Carson Research), indirectly supporting the crypto market. Bitcoin, returning to $116,000, could test the $118,000 level if the Fed confirms a soft policy. However, short-term volatility remains: in the past 24 hours, Bitcoin twice crossed the $116,000 mark but met resistance.
The crypto market is at a crossroads: Fed easing and U.S. economic weakness create growth conditions, but correction risks are high due to 'priced-in' expectations. Investors should closely monitor Tuesday's retail sales data and Wednesday's FOMC rhetoric. The long-term resilience of crypto assets is confirmed by their role as a hedge against inflation and stagflation. Maintaining a balanced portfolio is recommended, paying attention to Bitcoin support levels ($112–114k) and resistance levels ($118–120k).