Crypto News: Market Update July 2024
In July, the first eight Ethereum ETFs became tradable, marking a milestone for the crypto industry. Recent economic developments in the United States suggest a potential policy shift by the Federal Reserve. The labor market is finally showing signs of weakening, with an increase in unemployment and a slowdown in job growth. At the same time, declining inflation provides room for possible interest rate cuts. Fed Chair Jerome Powell has suggested that the central bank might lower interest rates in September if economic trends justify it.
July 5: The U.S. Labor Market Loses Momentum
In June, the U.S. labor market added 206,000 jobs, primarily in government and healthcare, while the unemployment rate rose to 4.1%. This suggests a weakening labor market that might prompt the Federal Reserve to consider lowering interest rates. The Department of Labor reported that 111,000 fewer jobs were created in April and May than previously estimated. Wage growth slowed to 3.9% year-on-year due to an increase in the labor force by 277,000 people in June.
Although there is no immediate crisis, analysts warn about the reliance on government jobs, which could undermine the stability of the labor market. The Federal Reserve needs a weak labor market to bring inflation back to 2%. These data thus suggest potential interest rate cuts starting from September this year. (Source: Reuters)
July 9-10: FED Considers Interest Rate Cut as the U.S. Economy Slows Down
Federal Reserve Chairman Jerome Powell informed Congress that the U.S. economy is no longer overheating and that the labor market has cooled to pre-pandemic levels. This strengthens the possibility of interest rate cuts. Powell emphasized the balance between the risk of persistent inflation and the need to support economic growth, especially with the presidential elections approaching in November.
Powell indicated that while inflation remains above the 2% target, recent improvements in the data increase confidence that prices will continue to fall. Unemployment has risen to 4.1%, which may contribute to a further decrease in inflation.
Investors see nearly a 70% chance of an interest rate cut in September following Powell’s remarks. With a cooling labor market and declining price pressures, the Fed’s concern is shifting towards the risk of a recession, according to economists from Pantheon Macroeconomics. (Source: Reuters)
July 11: inflation fell to its lowest level in three years.
In June, inflation in the US decreased by 0.1%, bringing the annual inflation rate down to 3%, the lowest level in three years. Core inflation, excluding food and energy, increased by 0.1% and 3.3% year-over-year, marking the smallest rise since April 2021.
A 3.8% decrease in gasoline prices contributed to the lower inflation, although food and housing costs rose. The market now anticipates an interest rate cut by the Federal Reserve in September. Additionally, used car prices fell, further contributing to the positive inflation trend.
The figures reinforce expectations that the Fed may lower interest rates to support the economy, with possible further cuts by the end of the year. (Source: CNBC)
July 23: Spot Ether ETFs Begin Trading: What Does This Mean for Ethereum?
The first spot Ether exchange-traded funds (ETFs) are now tradable, which could have a significant impact on the Ethereum blockchain. Unlike existing Ether ETFs that track futures contracts, these new ETFs will invest directly in Ether.
Although Ether is less valuable than Bitcoin, this development could increase the visibility and investment base of Ethereum. Ethereum offers not only digital currency but also applications such as smart contracts and decentralized financial services (DeFi), which makes it serve a broader range of purposes than Bitcoin.
The introduction of these ETFs could potentially lead to more crypto-ETFs, depending on the approval of the U.S. Securities and Exchange Commission (SEC) and political conditions. For now, these ETFs are expected to generate significant trading activity and further position Ethereum as a technology platform. (Source: CNBC)
July 25: Strong growth figures for the U.S. economy in the second quarter of 2024 were released.
In the second quarter of 2024, the U.S. economy grew stronger than expected at an annual rate of 2.8%, driven by robust consumer spending and government expenditures. Consumer spending increased by 2.3%, and government spending rose by 3.9%. Despite a rise in imports and a decrease in the personal savings rate to 3.5%, there was positive news on inflation: the Personal Consumption Expenditures (PCE) price index rose by only 2.6%, lower than in the first quarter.
Despite rising credit card delinquencies, retail sales continued to increase, indicating resilient consumers. However, the housing market faces challenges due to falling sales and rising home prices. These mixed signals increase the pressure on the Federal Reserve to potentially lower interest rates. While the Fed is likely to keep rates steady in the upcoming meeting, speculation about a rate cut in September is growing. (Source: CNBC)
July 31: the Federal Reserve considered changes to interest rates in September due to decreasing inflation.
During a press conference on July 31, 2024, Fed Chairman Jerome Powell announced that a rate cut in September is possible, depending on economic developments. The Federal Reserve has kept its policy rate at 5.25%-5.50%, but signaled that inflationary pressures are easing, which provides room for policy adjustments.
Powell emphasized that the Fed’s decisions are based on economic data and not on political considerations, even though a rate cut right before the U.S. elections could be seen as politically motivated. Inflation, as measured by the Personal Consumption Expenditures (PCE) price index, fell to 2.5% in June, indicating that inflation is coming under control.
Investors interpreted Powell’s comments as a signal for a potential rate cut in September. Financial markets responded positively, with rising stock prices and falling government bond yields. Although the likelihood of a substantial rate cut is considered low, the Fed remains vigilant about economic developments and keeps its policy options open. (Source: Reuters)
Conclusion
The economic situation in the United States is on a fragile balance. While the weakening labor market and declining inflation present opportunities for the Federal Reserve to cut rates and stimulate the economy, concerns about overall economic stability remain. However, the market expects the Fed to lower rates in September, marking a significant shift after a period of strict monetary tightening. These decisions will not only influence the economic direction of the US but also have political implications, especially with the upcoming presidential elections. It is a crucial time for policymakers to navigate between stimulating growth and maintaining financial stability.
