Crypto Market in Correction Ahead of Fed Decision

Crypto markets ended last week on a rise with a total capitalization that once again exceeded four trillion dollars, but momentum weakened over the weekend.

U.S. stock markets reached record levels last week as participants expect a 0.25 percent rate cut from the Fed this week. However, the labor market continued to signal weakness with a sharp jump in weekly unemployment claims.

On Wednesday, the Fed is likely to cut rates for the first time in 2025 and ‘blame’ the weak labor market, according to analyst Kobeissi Letter. The retail sales report for August is due on Tuesday, which is an indicator of consumption and broader economic sentiment.

The main event of the week is the FOMC meeting on Wednesday, at which the central bank is very likely to lower rates for the first time since December 2024. CME futures markets predict 96.4 percent probability of a 25 basis point cut and 3.6 percent probability of a larger cut of 50 basis points.

The Fed has recently made it clear that it is more focused on the weakening labor market than on persistent inflation risks.

– We are concerned that the Fed meeting on September 17, which brings a 25 bp cut, could turn into a ‘sell the news‘ event as investors pull back to consider macro data – wrote JPMorgan Global Head of Market Intelligence Andrew Tyler in a note.

On Thursday, the Philadelphia Fed Manufacturing Index and initial unemployment claims data will be released, but neither is likely to impact the markets as much as the FOMC.

Given that the Fed’s rate cut is largely priced in, markets are already beginning to react with a typical Monday decline as total capitalization decreased by one percent to 4.13 trillion dollars.

Bitcoin surpassed 116,000 dollars twice in the last 24 hours but faced resistance before falling back to 115,000 dollars. Ethereum exceeded 4,700 dollars before pulling back slightly over the weekend to 4,630 dollars. Altcoins were mostly in the red with larger losses for xrp, solana, cardano, and chainlink.