The week ends and a new month begins. It’s the 1st of August, and if it doesn’t ring a bell, you’re either single, divorced, or not in a good relationship. You know why? It is because August 1st is known as “National Girlfriend’s Day.” On this special day, you can’t miss the relationship between U.S. President Donald Trump and Federal Reserve Chairman Jerome Powell. Think about it, how can you?
The Trump–Powell love story unfolds
From the day Trump was elected as President of the United States of America, he has been asking Powell to reduce the interest rates; however, Trump’s calls fell on deaf ears. Powell never moved a digit on the interest rates, stating that Trump’s volatile tariffs have been the main reason that has prevented him from cutting rates.
As the blame game goes on, one should not forget the names Trump gave Powell —Mr. Too Late, in addition to the termination threats. In a recent statement, Trump stated, “Too Late’ Powell should resign, just like Adriana Kugler [member of the Federal Reserve Board of Governors], a Biden Appointee, resigned.
Whether Powell will resign or whether Trump himself has the power to fire the head of an independent body is not something that we mere mortals are capable of deriving, so we will leave it at that.
However, one commendable thing is Powell’s thick skin. Amidst all these threats, Powell has been holding the interest rates steady between 4.25%-4.5%. As the giants fight, one proverb comes to my mind. It goes like “when the elephants fight, it is the grass that suffers”. So, let’s see who is suffering from the latest tariff policy set by Trump.
What goes around, comes around
Concerning Trump’s new tariff policy, Atakan Bakiskan, a US economist at Berenberg Bang, said in a note on Friday, “Many European, Japanese, and South Korean-based producers compete more against each other than against US-based producers in the US market. As they all face a 15% levy, the competition between them is distorted by less than would have been the case if Trump had imposed widely different country-specific US tariffs against these key advanced economies,”.
Meanwhile, Trump fired the Commissioner of the Bureau of Labor Statistics, Erika McEntarfer, stating that the bureau manipulated monthly job reports for “political purposes”. The unemployment rate plays a major role in the interest rates, as the Federal Reserve considers the unemployment rate and the economic conditions as a whole to decide the interest rate. So with a low unemployment rate and stable conditions, a rate cut was unnecessary, and Trump was livid with no rate cuts.
Bitcoin dips to $113K
The crypto market succumbed to the effects of the tariffs and the lack of interest rate cuts. Bitcoin was trading at $118K and it crashed to $115K, when traders saw that there were no rate cuts and there was no chance for the BTC price to increase, which meant their profit margin was going to be constricted. So they started selling to avoid their profit margin shrinking. When the interest rate for borrowing money is high, investors usually shy away from betting on risky assets, like crypto, as after all, they paid a premium to get the loan and don’t want to lose.
Currently, Bitcoin is priced at $113.8K, after losing 3% in the last 24 hours. However, the 24-hour trading volume is almost at $80 billion, after gaining 2% in the last 24 hours. Despite losing a lot of value, the Bitcoin dominance is still above the 60% level. However, the below chart shows that the orange line (Bitcoin dominance line is facing downward), while the Ethereum dominance (Grey line) is at 27% and other tokens’ dominance (blue line) has tilted upwards.
The Bitcoin dominance is high, maybe because some retail and institutional investors are buying the dip. The chart below shows that wallet inflow has increased after a period of leaking out. On August 1, the inflow was 11.6K BTC, and the open interest, which has been increasing exponentially, has cooled off at the top —122K. This suggests that traders are not opening new positions.
Will Bitcoin go up?
Founder of a trading and training group, Ed_NL, stated that Bitcoin could reach $135k. When Ed_NL transposed the 2024 summer pattern on top of Bitcoin’s current prices, three lower lows coincided with what’s happening to Bitcoin right now. Based on the historic price movement, Bitcoin may hit $135K minimum
Ethereum will hit $4K in August
CEO of ITC crypto, Benjamin Cowen, saw two likely paths for Ethereum. “Would like to see ETH break $4k in August because I think it would then allow it to go higher by the end of the cycle, if the potential September weakness could just be backtesting $4k.”
However, in the event that ETH cannot break through in August, it may hold support at the bull market support band and then form a higher low in September. Cowen’s bottom line is “My base case remains that ETH sees all-time highs this year, but the path to get there is difficult to predict exactly.”
On the 4hour chart, Ethereum is fluctuating inside a bull flag, touching the upper and the lower trendline. As ETH has rebounded off the lower trendline, the next move would be towards the upper trendline, which is at $3,800. Once the bull flag is completed, Ethereum may break out and reach $4,500. So when money moves into Ethereum, it could be the first sign of the altcoin season.
A crypto netizen stated that the Bitcoin dominance has reached the maximum, and therefore, it was time for the altcoin season. However, on the Altcoin Season Index (ASI), the value has dipped from 60 to 41. The ASI detects whether it’s an altcoin or a Bitcoin season based on how the top cryptocurrencies have performed. In particular, it takes the altcoins that have outperformed BTC and presents them as a percentage. So when the ASI is above 75%, it is altcoins season, and when the ASI is 25% or below, it is Bitcoin season, while any value greater than 25% but less than 75% is considered neutral.
What to expect?
As the next Federal Open Market Committee (FOMC) is set to meet on September 17, all eyes will be on the Chairman. With the mounting pressure from the president and 80% of the market expecting the interest rates to fall between 4%-4.25%, it will be interesting to see how things will play out. If by any chance, if Powell once again keeps the rates unchanged, how Trump will react is another big dilemma.
