Sunday marked the onset of a tumultuous week for cryptocurrencies, anticipated to encounter significant downturns. As expected, notable declines occurred, with some cryptocurrencies like DOGE experiencing losses of up to 10%. This prompts a crucial question: why did cryptocurrencies fall, and what are the expectations for this week?
Reasons Behind the Crypto Decline
Bitcoin 
$64,076‘s price failed to uphold the critical support level of $112,500. It dipped below $112,000, and the ongoing closures below this threshold indicate a potential test at $107,000. The scenario reflects Bitcoin’s struggle to maintain the support zone amidst heavy selling pressure, unable to surpass resistance.
In our previous analysis, we highlighted the importance of upcoming statements from Fed members, along with key data releases such as GDP and PCE. The lower-than-expected unemployment claims last week posed a worrying signal for employment recovery. We noted that potential inflation risks would unsettle investors, likely diminishing risk appetite until the PCE data release on Friday.
DOGE and SOL, cryptocurrencies that led the recent rally, unsurprisingly spearheaded the decline as well. In an environment where short-term investors are inclined to secure profits, rapid gains quickly turned into swift losses.
Weekly Market Expectations
Today witnessed extensive declarations from five Fed members, shared as the decline intensified, pushing losses to daily highs. These members predominantly voiced concerns about persistent inflation risks, with no immediate employment alarms, thus curbing expectations that Fed might continue lowering interest rates following prior statements made last week.
Miran, dubbed the “President’s voice at Fed” by Trump, acknowledged yesterday, “While I realize convincing members of a cut won’t be immediate, I plan to present my case.”
What do we stand with today? Dominant Fed members believe a 25bp cut suffices while acknowledging persistent inflation risks. Cook remains irremovable, and Powell’s tenure continues until May, indicating no leadership changes soon.
Consequently, investors are expected to adopt a risk-averse stance, particularly before Friday’s data, and liquidate short-term profits. ETF investors might also reduce risks and amplify the selling wave in spot markets.
The monthly expectation for Personal Consumption Expenditures (PCE) in the U.S. is an increase of 0.3%. The previous figure was 0.2%, and consistent rises were noted from March to June. Given preceding sharp declines in January and February, this steady increase may not pose a severe issue. However, if August data exceeds 0.3%, indicating 0.5 or 0.6, Fed might perceive an underlying problem.
In summary, echoing the significant developments reported by COINTURK, a heightened risk aversion from investors might persist until Friday. Analyzing Fed-related insights might reveal Tuesday’s 16:00 Powell address won’t be as dovish, impacting the negativity until Friday.
Optimistically, despite Fed members’ inflation concerns, if Powell signals maintaining the rate cut trajectory and emphasizes employment risks, PCE expectations might shift towards a limited upside, reversing declines and potentially accelerating a rally based on forthcoming data.
ETF investors, categorized as a higher echelon of macroeconomic interpreters compared to short-term individual investors, may dictate market directions with calm responses to potential panic or declines.
