Markets
Cryptocurrency Market Forecast for Q3 Amid Bitcoin Sales and Fed Rate Cuts
Coinbasein its weekly market commentary, noted that the third quarter had started on a sour note with excess supply generated by blind buying Bitcoin Bitcoin sales are coming from sources such as the German government. While the size of Bitcoin sales is not large compared to BTC’s daily spot volumes, it has put pressure on Bitcoin prices.
However, today the German government dumped all of its Bitcoin holdings, suggesting that some market distortions are likely to dissipate soon.
Will the sequel go smoothly or are new problems ahead?
Uncertainty looms over Mt. Gox repayments
THE Refunds following Mt. Gox incidentThe market movements, which began on July 5, have also had an impact on the markets. The extent to which refunded BTC is being sold remains uncertain. Coinbase points out that this uncertainty is more detrimental to the market than actual sales, as the largest creditors are likely covered. Concerns persist over the possibility of a US recession later this year or early 2025, which adds to the market volatility.
Given the current economic environment, Coinbase sees substantial signs of a slowdown in the U.S. economy. It estimates that the economy will peak in the second quarter of 2024 and predicts that the Federal Reserve will cut interest rates starting September 18.
The recent June CPI, showing a monthly change of -0.1% and an annual change of 3.0%, fell below the median forecast, supporting a more accommodative stance from the Fed.
Potential impacts of rate cuts on the market
Coinbase warns that rate cuts may not be bullish for markets if there are fears of a deeper slowdown. Retail investors may be hesitant to take new positions in stocks or cryptocurrencies if the U.S. economy enters a recession. Conversely, if the economy remains relatively strong and the Fed cuts rates, it could unlock more liquidity and attract retail participation. The upcoming U.S. elections in November also present an opportunity for fiscal expansion, which could boost Bitcoin as an alternative to traditional financial systems.
Rough waters ahead!
Coinbase expects price volatility in Q3 2024 as cryptocurrency markets lack strong narratives. For example, the market is undecided on whether a potential ETH Spot ETF will be bullish or bearish. This uncertainty could be advantageous, leaving room for surprise outperformance.
Ethereum Roadmap
The 7th Ethereum Community Conference highlighted critical technical topics including Layer 2 (L2) scaling, ETH staking, and cross-chain interoperability. Discussions and panels, including a keynote address by Vitalik Buterin, reaffirmed Ethereum’s commitment to being a maximally secure and decentralized Layer 1 (L1) settlement layer for various L2s.
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Although challenges remain, Ethereum’s focus on scalability paints a promising picture for its future.