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Although there are several major economic events taking place in the following five business days, the reality is that only a handful of them could (and most likely will) impact the cryptocurrency market. That impact, though, is expected to be quite vicious in either direction.
The Kobeissi Letter highlighted an auction of 20-year securities, August retail sales, and, most importantly, the Federal Reserve’s September interest rate decision on Wednesday. The latest data shows that markets assign an 85%-90% probability that the central bank will hike rates by 25 basis points, following contrasting economic data.
Fed in Focus
The Fed setup has changed dramatically in just a few weeks, starting with the August employment data from early September, which showed that the US economy had added 162,000 jobs last month, triple expectations. Later on, the PPI numbers indicated that the annual producer inflation had accelerated to 5.4%. Last Friday’s CPI report subsequently confirmed headline inflation at 3.4%, with monthly core CPI slightly hotter than expected.
This combination, plus the fact that oil prices remain above $100 and diesel hit a new record in the States, has strengthened the Fed’s case for tighter policy.
Bitcoin and the altcoins have already demonstrated their sensitivity to this shift, dropping sharply following Fed Chair Kevin Warsh’s speech from Jackson Hole several weeks ago, and again as rate-hike odds increase after the latest economic data.
The only question is whether this highly expected rate hike has been priced in, with BTC sliding from $82,400 to under $78,000 as of now. As such, investors will closely watch Warsh’s press conference after the meeting for clues as to whether the Fed’s decision on Wednesday is a one-off adjustment or the start of another tightening cycle.
The Tuesday Test
Before all eyes turn on the Fed on Wednesday, the crypto industry has another major event on Tuesday. The Senate’s cloture vote on the CLARITY Act is scheduled for 2:15 P.M. that day, and it requires 60 senators to advance the debate on the key bill.
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The CLARITY Act aims to establish a comprehensive US crypto market structure and shed further details on the respective roles of the SEC and the CFTC.
Republicans released an updated text last week, adding new rules for non-decentralized DeFi protocols and clarifying how credit unions can deal in crypto. Moreover, they published their “last, best, and final” draft of the legislation on Sunday, including an ethics proposal backed by the POTUS.