Coinbase analysts doubt rate cuts will drive market movement

Cryptocurrency markets remain subdued despite expectations of a Fed rate cut, with Coinbase analysts warning that quantitative easing alone is unlikely to fuel a recovery.

Coinbase analysts question whether quantitative easing will act as a catalyst for market recovery, despite traditional financial markets responding positively to falling interest rates.

While traditional markets have responded positively to the decline in long-term interest rates, the crypto sector has remained largely unresponsive due to certain supply-side factors and the absence of strong market narratives, analysts highlighted in a research report dated August 23.

“[…] “The lack of crypto-specific narratives leaves the asset class largely dependent on macroeconomic factors to drive performance.”

Coinbase.

Coinbase analysts pointed to several factors holding back the market rally, including the ongoing distribution of Bitcoin from the Mt. Gox rehab process and the U.S. government’s continued sale of seized crypto assets. Additionally, the broader market’s reliance on macroeconomic indicators has left crypto investors hesitant to deploy their capital ahead of the Federal Reserve’s September meeting.

Coinbase warns about interest rate cuts

Despite market expectations of easier monetary policy, analysts warn that the pace and context of any rate cut will be critical. While gradual easing in response to controlled inflation may support markets, more aggressive cuts in response to economic downturns could have the opposite effect.

However, he downplayed the possibility that Federal Reserve Chairman Jerome Powell’s speech at the Jackson Hole Economic Symposium would provide significant direction for markets.

“[…] “Given that the statements at this conference do not have significant forward-looking implications, we are skeptical that his comments will have a major impact on risk markets.”

Coinbase.

Instead, market participants are likely to shift their focus to upcoming labor market data, especially in light of recent downward revisions to employment figures that point to a cooling job market. The analysts say they “do not believe rate cuts are a market catalyst per se,” emphasizing that the market’s future performance will depend on broader macroeconomic trends and crypto-specific factors.