Bitcoin and crypto markets see renewed risk appetite

Bitcoin made a strong comeback, jumping to $65,000 on August 23rd. This surge came after U.S. Federal Reserve Chair Jerome Powell dropped a hint at Jackson Hole that rate cuts might be on the table soon. 

His comments sparked a chain reaction: the U.S. dollar took a hit, stocks climbed, and Bitcoin, which had been lagging behind equities, suddenly woke up with a sharp 6.06% rise in a single day. This was its second-largest daily increase since May. 

Crypto markets seemed to mirror the broader risk appetite in the traditional financial markets. Bitcoin has been closely following U.S. equities, but until now, it looked pretty weak compared to them. The recent low in early August showed Bitcoin struggling to keep up. 

Over $40 million in Bitcoin perpetual futures were liquidated, and across all crypto pairs, liquidations totaled $140 million. Interest in delta-neutral and funding arbitrage trades is on the rise, meaning traders are looking for strategies that don’t rely on big directional moves. 

This could make room for more price gains in Bitcoin and other cryptocurrencies without the risk of big liquidation events. Funding rates, which are way lower now than earlier this year, show that traders are being cautious even though the overall vibe is still bullish.

The U.S. labor market is a big part of this story. Recent data revisions showed fewer jobs were added than initially reported, and July’s payroll numbers were weaker than expected. The unemployment rate even hit 4.3%, the highest since the pandemic started winding down. 

All this has people worried that maybe the Fed has waited too long to cut rates. Some folks are saying that the Fed needs to act now before things get worse. But then, there’s also data like weekly jobless claims, which aren’t as bad, so maybe things aren’t falling off a cliff after all. 

It’s confusing, and that’s exactly why markets, including crypto, are on edge.