Although global fluctuations continue, we did not see a sharp sell-off like last month. Such fluctuations are normal before Fed meetings, but what is approaching is not just an ordinary interest rate decision. A change in direction will also occur. Fed policy will loosen, and in the past, this has always triggered fluctuations.
Macroeconomic Summary
Data on the US labor markets brought disappointments regarding the Fed and the US economy. The cooling economy and the Fed’s slow movements increased concerns. Subsequently, we saw the worst weekly stock sell-off since March 2023.
What happened last year? We saw that the rapid rise in bond yields triggered bank-run-like events in some banks in March. Drops of up to 80% became normal in these banks.
While the S&P 500 fell 1.7% and the Nasdaq 100 fell 2.7%, August employment growth was 23,000 below estimates. The 2-year treasury yield fell by 15bp, and Christopher Waller from the Fed said he was “available” for a larger rate cut potential. Suddenly, the market started to strongly price in a 50bp cut.
The excitement for a 50bp cut did not last because cooling signals supporting recession concerns and the Fed’s potential to make things worse by moving quickly suddenly struck minds. Non-farm employment increased by 142,000 last month, keeping the 3-month average at its lowest level since mid-2020.
The market’s reaction to the previous employment data was worse, but the S&P 500 experienced a loss of over 1.5% for the first time in 12 years for two consecutive business days. While oil and gold fell, Bitcoin 
$77,196 lost nearly 6% yesterday.
What Will Happen to Bitcoin (BTC)?
What a week, wasn’t it? Especially the last 2 days were like a storm, but BTC managed to stay above $52,000. Some of our predictions about these days last year did not hold. For example, it was not expected that the Fed would keep rates at the ceiling for such a long time over a year. However, we mentioned that volatility could suddenly increase with the policy change from tight monetary policy to easing before Fed rate cuts.
This graph shows what the rate cut in 2020 caused in the S&P 500 index. Markets rise with the expectation of a cut, and a decline occurs as the policy turns 180 degrees. The same thing happened during previous rate hike reversals.
So what will happen to Bitcoin? Look at the graph again; with rate cuts, we might see a deeper dip. September is already suitable for this. However, as the policy shift is digested towards the end of the year, the real bull run may begin. In 2020, the S&P 500 offered nearly 100% returns on an index scale to patient investors. This also supports the BTC rise story for the last quarter.
