The crypto market has been quite excited about the possibility of the United States Federal Reserve cutting interest rates in the remaining months of the year. This display of emotions could be seen in the last crypto market rally on the back of a positive Jackson Hole speech by Fed Chairman Jerome Powell.
A different reaction was felt across the cryptocurrency market after a weaker-than-expected Non-Farm Payroll (NFP) data was released on Friday, September 5. However, the general consensus seems to be that this latest weak job data release could be rather positive in terms of interest rate cuts.
Weak Labor Data Increases Likelihood Of Rate Cuts: Major Banks
The US labor market data released on Friday was weaker than expected, as only 22,000 jobs were added to the economy in August, falling short of the 75,000 job expectations. Major banking firms have now come forward with how this new report could impact the outcome of the Federal Open Market Committee (FOMC)’s meetings in the coming months.
According to a Bloomberg report, Bank of America analysts have softened their stance on no interest rate cuts in 2025 as a result of Friday’s labor data release. The analysts now expect the Fed to cut rates at least twice before year-end—two 25 basis points (25BPS) cuts in September and December 2025.
Meanwhile, analysts at investment banking behemoth Goldman Sachs are projecting three 25BPS cuts before the year runs out. The first interest rate cut is expected to occur in September, with two additional cuts anticipated in October and November.
In a separate Reuters report from June, Citigroup had always expected three 25BPS cuts in the remaining months of the year. However, unlike Goldman Sachs, the banking titan projects these interest rate cuts to September, October, and December.
How Successive Rate Cuts Could Catalyze Crypto Bull Run
Lower interest rates have always been viewed as a positive macroeconomic indicator for the risk assets, including the crypto market. With fixed-income assets becoming less attractive, investors tend to have a risk-on attitude towards the riskier assets.
Hence, periods of low interest rates or rate cuts have often been associated with an increase in crypto prices and sustained bullish runs. Meanwhile, higher rates tend to lead to a decline in crypto liquidity, as investors are less incentivized to enter the market.
According to data from CoinGecko, the total crypto market capitalization stands at around $3.09 trillion, reflecting an over 1% decline in the past day.
The total crypto market capitalization on the daily timeframe | Source: TOTAL chart on TradingView
