What to Watch This Week in Crypto and Bitcoin
Ethereum is moving to proof-of-stake, the ECB announces its main interest-rate decision, and the head of the Fed is set to speak.
Ethereum is moving to proof-of-stake, the ECB announces its main interest-rate decision, and the head of the Fed is set to speak. Investors should keep an eye on these economic and financial data.
After a brief stabilization at the start of the week, helped by a stronger-than-expected U.S. consumer confidence reading, the U.S. equity market dipped again and showed a softer trend. A stronger-than-expected rise in the eurozone’s consumer price index (CPI) to 9.1 percentage points supports ongoing high inflation in Europe. The fact that U.S. ISM Manufacturing indices also came in stronger than expected is likely to be welcomed by the two major central-bank leaders, Fed Chair Powell and ECB President Lagarde. Cooler-than-expected fundamentals combined with persistently high inflation will push the world’s two top central bankers to hold to their planned rate increases at the upcoming September meetings. The recent down-move in prices this past trading week also contributed to a correction in crypto prices.
Cryptomarket proves more resilient than expected
The fact that Bitcoin (BTC) and Ethereum (ETH) have managed to hold their own in this challenging environment, despite a negative Nasdaq close, is a positive sign. While the Bitcoin price traded in a tight range between USD 19,500 and USD 20,500 over the last seven trading days, it has repeatedly formed higher lows and appears not to want to give up the psychological level around USD 20,000 just yet. The Ether price showed even more resilience against the threat of a price correction. With the launch of "The Merge" on September 6 looming, investors still seem to be betting on another Ethereum price rally ahead of the PoW-to-PoS transition completion.
All eyes will be on Thursday, September 8, in the coming trading week. The European Central Bank will publish its main-rate decision that day, along with the deposit facility rate. Since Jackson Hole, traders have been pricing in a larger 100-basis-point increase rather than 50 basis points as recently reported. The deposit facility will likely rise by another 50 basis points to 0.50%. A few weeks ago, market experts were looking for a 25-basis-point move. In the ECB’s last decision, Lagarde surprised forecasters with a 0.5 percentage-point hike.
Given the eurozone inflation jumped from 8.9% to 9.1%, Lagarde believes sizable rate steps are necessary. Rate moves stronger than what markets expect could help restore the euro’s weak exchange rate against the U.S. dollar. It remains to be seen whether a modest dollar consolidation will be enough to push Bitcoin higher. Crypto traders should wait for the first price reaction after the key rate move is announced, as markets often move in the wrong direction immediately after such releases, as seen with last Friday’s U.S. NFP print.
Short-term press conferences of the central-bank chiefs in focus
Also of great importance to traders will be the upcoming press conference of U.S. Federal Reserve Chair Powell, scheduled soon. That Lagarde, despite the ECB press conference after the rate decision, is expected to speak again around 16:15 CET, reflects the delicate European situation. From Thursday afternoon, expect significantly higher volatility.
EU summit seals the second trading week in September
On Friday, September 9, the EU summit in Brussels kicks off at 12:00 CET. EU member-state representatives last gathered on March 26, 2021, to discuss current EU challenges and possible solutions. In particular, the post-summit press conference is likely to trigger larger price moves in the currency and stock markets. Strong moves in European equities could also ripple through the crypto market.
