U.S. Labor Market Slows, Inflation Stabilizes, Fueling Rate Cut Projections; Digital Assets and Stocks Thrive

The U.S. labor market's deceleration, coupled with stable inflation metrics, has intensified speculation about an imminent Federal Reserve (Fed) interest rate cut. This development has sparked record highs across major U.S. stock indices and a rally in the digital asset market, led by Bitcoin (BTC).

Bitcoin and Altcoin Market Surge in Tandem

As of 8:30 a.m. on the 12th, Bitcoin (BTC) was trading at 160.22 million KRW on South Korea’s Upbit, reflecting a 1.05% increase from the previous day. On Binance, the global cryptocurrency exchange, Bitcoin surged by 1.29%, reaching $115,315.

The broader digital asset market mirrored Bitcoin's upward momentum. The CoinDesk 20 index, which tracks leading cryptocurrencies including Bitcoin and 19 major altcoins, climbed 1.41%. Ethereum (ETH) advanced 2.57% to $4,461, while XRP (XRP) gained 2.04%, trading at $3.04.

Liquidation data from CoinGlass revealed that approximately $40.96 million worth of Bitcoin positions were cleared in the last 24 hours, with 74.6% being short (selling) positions, reflecting bearish sentiment caught off guard. Across the entire crypto sector, total liquidations over the same period reached $242.15 million, showcasing heightened market activity.

CPI and Labor Market Trends Drive Rate Cut Expectations

The U.S. Department of Labor's latest Consumer Price Index (CPI) report revealed a 0.3% month-over-month increase and a 3.1% year-over-year rise in core prices for August, aligning with market forecasts. Simultaneously, weekly jobless claims climbed to a four-year high, signaling weakening labor market conditions. These data points have further fueled speculation of a Fed rate cut at its next meeting.

Skylar Winand, Chief Investment Officer (CIO) at Reagan Capital, emphasized the Fed's potential pivot, stating, “With inflation relatively stable, the Fed now has room to focus on the weakening labor market.” He further predicted a 25-basis-point (0.25%) rate cut in the upcoming Fed meeting, with the possibility of two additional cuts later in the year.

Ellen Zentner, Chief Economist at Morgan Stanley Wealth Management, also commented on the evolving economic landscape, noting, “Employment remains the key variable rather than inflation. The latest CPI numbers are not sufficient to prevent the Fed from pursuing a rate cut.”

U.S. Stock Market Reaches New Heights

Optimism surrounding a potential interest rate cut propelled U.S. equities to all-time highs. The Dow Jones Industrial Average surged by 1.36% to close at 46,108.00 on the New York Stock Exchange (NYSE). The S&P 500 advanced 0.85%, finishing at 6,587.47, and the Nasdaq 100 rose 0.72%, ending the session at 22,043.07. All three indices achieved record-breaking closings, reflecting robust investor sentiment.

Digital Assets Extend Their Rally

The digital asset market continued its bullish momentum alongside equities, spurred by improved liquidity, favorable macroeconomic conditions, and growing regulatory optimism. A recent report from Coinbase predicted sustained growth through the year’s end, identifying Bitcoin as a standout performer. The report attributed Bitcoin’s success to macroeconomic trends that suggest performance could surpass market expectations.

Coinbase analysts David Duong and Collin Vasco explained, “Bitcoin continues to benefit from a positive macro environment, making above-expectation outcomes feasible. Additionally, risks that could disrupt U.S. monetary policy remain limited.”

However, the report cautioned about challenges within the altcoin market, where intensified competition is emerging. It warned, “New investors are increasingly gravitating towards smaller assets instead of established players like Bitcoin and Ethereum. This trend could lead to consolidation or alliances among smaller and mid-size projects, reshaping the altcoin landscape.”

Neutral Sentiment in the Cryptocurrency Market

The Alternative Fear & Greed Index, a widely followed sentiment indicator for the digital asset market, rose from 49 to 54 within the day, signaling a shift from fear toward a neutral stance. This index tracks investor behavior, scoring 0 for extreme sell pressure and 100 for bullish buy momentum. The slight rise reflects steady sentiment amid the ongoing crypto rally and broader market optimism.

Conclusion: Economic Shifts Poise Markets for Growth

As the U.S. labor market cools and inflation remains stable, the anticipation of a Federal Reserve rate cut has invigorated both traditional and digital markets. Record-breaking stock indices and gains across leading cryptocurrencies—driven by improving liquidity and macroeconomic tailwinds—indicate strong investor confidence. However, volatility and shifting trends in the altcoin market serve as a reminder of the risks still present in an evolving financial ecosystem. Combined with neutral investor sentiment, markets are treading cautiously, yet optimistically, toward future opportunities.