This article is reprinted with permission from Phyrex_Ni, and the copyright belongs to the original author.
As expected last week, the most noteworthy event this week is the non-farm payroll data, but the results were shocking. At least I did not anticipate that the employment data would be this poor. After the non-farm data was released, the market fully expected the Federal Reserve to cut interest rates by 25 basis points in September, and some even began to anticipate a possible 50 basis point cut. From my personal perspective, it is not certain that a rate cut will happen, and even if it does, 25 basis points is likely to be the upper limit. The main reason the Federal Reserve might choose to cut rates is due to expectations of an economic downturn. Not to mention that on Monday, the non-farm data for 2025 was significantly revised down by over 900,000.
The labor data this time is indeed poor. From the job vacancy data, for the first time since April 2021, the number of unemployed people in the U.S. (7.24M) has exceeded job vacancies (7.18M). In recent years, especially during the COVID-19 pandemic, job vacancies have consistently outnumbered the unemployed, indicating a labor shortage and giving workers more bargaining power. The reversal now means that the job market is starting to loosen, with fewer job openings and more people looking for work.
This also indicates that we may have entered a phase of slowing economic growth, with the job market cooling down. The U.S. labor market has shifted from a situation of demand exceeding supply to one of supply exceeding demand, so just from the job vacancy data, it could promote the Federal Reserve's rate cut. Additionally, last week the Federal Reserve's Beige Book was released, and its overall tone remains cautious, showing that economic activity is flat in most regions of the U.S., with only a few areas recording moderate growth. Consumer spending continues to slow, retail and dining are under pressure, tourism is relatively stable, automotive demand has slightly increased, but manufacturing remains sluggish. Companies are generally cutting costs through capacity relocation, automation, and AI, with some regions looking forward to data center construction bringing new growth. However, overall sentiment is clearly divided, with some believing that demand can still hold up, while others feel increasing pressure.
In terms of the labor market, employment remains generally stable, with slight declines in some areas. Companies are noticeably more cautious in hiring, with some reducing their workforce due to weak demand and others cutting jobs due to increased automation. However, low-skilled positions remain tight, and wage growth is moderate. On the price front, most regions report easing inflationary pressures, but housing rents, utilities, and the costs of technical services continue to push up overall price levels. Companies have limited ability to pass on costs, and there is a general expectation that prices will continue to rise in the coming months, with some regions even anticipating an acceleration in price increases.
From the market's perspective, it shows that there are no obvious signs of expansion in the U.S. economy. The weakness in consumption and manufacturing indicates insufficient growth momentum. Although the labor market is stable, it lacks further expansion, and the stickiness of prices means that inflation is far from a safe zone. This creates a greater challenge for the Federal Reserve's subsequent rate-cutting path. The necessity of a rate cut is increasing, but it is uncertain whether a rate cut can truly alleviate economic pressure. The market will oscillate between "rate cut benefits" and "recession risks." Overall, this Beige Book presents more of a "stagnant economy + stubborn inflation" impression, increasing market entanglement and volatility expectations.
The signs of economic decline are not limited to the labor market. The latest data shows that U.S. construction spending is also declining, primarily due to high interest rates and weak real estate demand, which is closely related to the current decline in construction spending and employment. The core reason for the downturn in the construction industry is the high interest rate environment. The Federal Reserve has maintained high interest rates for an extended period, raising financing costs, leading to increased borrowing costs for developers and a reduction in commercial and residential construction starts.
On the other hand, high interest rates have also triggered weak real estate demand. The 30-year mortgage rate has exceeded 7%, suppressing home-buying demand and affecting new residential construction. Moreover, the troubles in commercial real estate may be even greater, with high vacancy rates in office buildings and reduced investment in development and renovation. These are all reasons for the decline in construction spending, and they also signal an economic downturn. However, the root cause of all this still lies in high interest rates. While a rate cut may not necessarily reverse the situation, it can certainly delay economic issues, which is one of the reasons Trump has consistently emphasized the need for rate cuts. Looking at nearly 50 years of U.S. history, this situation has almost only occurred during economic recessions, except for 2018.
On September 9, Beijing time, the New York Fed also released the August 2025 Consumer Expectations Survey. Overall, the survey shows a slight rise in inflation expectations, worsening employment confidence, and diverging household financial expectations. In terms of inflation, one-year inflation expectations rose to 3.2%, while three-year and five-year expectations remained at 3.0% and 2.9%, respectively, with short-term inflation uncertainty increasing. Home price expectations have stabilized at 3% for three consecutive months, while expectations for rent, education, and healthcare cost increases have receded, with food and energy remaining unchanged.
Regarding the labor market, wage growth expectations have been slightly lowered to 2.5%, and the unemployment rate expectation has risen to 39.1%. The risk of unemployment and the probability of involuntary unemployment have increased, while the success rate of job searching has dropped to 44.9%, marking a new low since the series began in 2013, indicating a significant decline in employment confidence.
In terms of household financial conditions, the expectation for household income growth remains flat at 2.9%, while the expectation for spending growth has slightly risen to 5%. The perception of credit availability has improved compared to last year, but future expectations are tightening, with the probability of debt default rising to 13.1%. Tax expectations have increased, while expectations for government debt growth have decreased. There is an increased expectation for rising savings rates. The current evaluation of household financial conditions has worsened, but views on the next year are divided, with more people expecting improvement, while also more expecting deterioration.
Overall, this survey reflects that American consumers still have concerns about short-term inflation, and more critically, there is a sharp decline in confidence in the labor market. Insufficient job mobility is seen as a potential recession risk signal; expectations for consumer spending remain high, which may bring structural pressures. This report conveys a negative message to the market, with a weak labor market compounded by sticky inflation, increasing the urgency for the Federal Reserve to cut rates, but also raising market concerns about economic decline.
Next, a macro aspect of importance is the resignation of Japanese Prime Minister Shigeru Ishiba. Overall, Ishiba is a hawk in Japan who supports rate hikes, and his resignation is likely to lead Japan's policy to lean towards easing in the short term, increasing the probability of maintaining low interest rates and not raising rates. Japan is one of the largest borrowing countries in the world, and low interest rates make carry trades more attractive, making it easier for liquidity to flow into U.S. stocks and risk assets like $BTC. Therefore, low Japanese interest rates are beneficial for risk markets. For those holding U.S. dollars or stablecoins, Ishiba's resignation may lead to further depreciation of the yen against the dollar, making the cost of living in Japan lower for those holding dollars.
Additionally, in the past week, there have been policy impacts on the cryptocurrency industry. Nasdaq has begun requiring shareholder approval for new shares to purchase cryptocurrencies, which has slowed the trend of companies transforming into cryptocurrency-focused firms, as Nasdaq may delist or suspend trading for companies that do not comply with regulations. With federal regulators stepping back, Nasdaq is now the main enforcer of rules for cryptocurrency-related stocks. Following the policy announcement, $BTC and $ETH, as well as U.S. stocks primarily focused on strategic reserves, experienced varying degrees of decline, marking one of the largest "policy kills" recently, primarily targeting U.S. listed companies that use token purchases to drive stock prices up.
In summary, in the future, if listed companies want to buy cryptocurrencies, they will need to obtain majority approval from shareholders at shareholder meetings, rather than just a board resolution. Therefore, for companies like $MSTR that buy $BTC weekly, the complexity will increase, and the overall process will lengthen, but it will not reduce the total amount of BTC purchased by MSTR. Generally, it may reduce the frequency of purchases, for example, changing from buying once a week to once a month, but the amount purchased at one time may increase.
Moreover, companies usually adopt "shareholder authorization" or "shareholder planned approval" methods to avoid having to hold a meeting each time. For example, the board may propose a request for shareholder authorization to issue a certain maximum number of new shares within a future period (e.g., 12 months) and use the funds to purchase cryptocurrencies. If shareholders approve the proposal, the company can operate multiple times within the authorized limit without having to hold a shareholder meeting each time. Therefore, essentially, while it has become more complex, it will not affect normal purchases. The negative sentiment from this news should be digested over time.
Last week, many investors were discussing $MSTR's entry into the S&P 500. Based on the application standards for the S&P 500, MSTR generally meets the criteria, but there is a slight discrepancy: although MSTR is "profitable," most of the profits are paper gains, which are generated from holding $BTC. Whether this part will be recognized by the S&P is a very challenging judgment. If the index committee recognizes unrealized gains from BTC as qualified profits, then it meets the conditions. However, if the committee insists that core indicators must be based on operating profits, it may be rejected.
Secondly, MSTR's main business logic is holding Bitcoin, which means that profits and losses originate from the same source, both coming from changes in BTC prices. This may lead the index committee to worry that profits are highly dependent on BTC price fluctuations rather than core business operations. If the green light is given, it could easily lead to a backdoor listing in the S&P. Additionally, looking at MSTR's performance, it has fallen for two consecutive working days. Although this is due to Bitcoin and Nasdaq, if the market truly expects MSTR to succeed in listing, there should at least be some movement, similar to when Robinhood was expected to list, which saw a significant surge.
As a result, MSTR was not included, but $HOOD was confirmed to be added to the S&P 500, officially joining the index on September 22, 2025. The last company to be included was Coinbase, which saw a significant increase in stock price after inclusion. Some analysts estimate that Robinhood will attract about $3.5 billion in passive fund inflows, enhancing its legitimacy and appeal among institutional investors. From the data at Monday's close, Robinhood's performance was decent, but there is still some gap compared to Coinbase. At the opening on Monday, it fell by more than 2%, only rebounding towards the close.
Based on previous tracking of Coinbase and new stocks in the S&P 500, if Robinhood can pull back, there should still be buying opportunities before September 22, as there is often some upward space when it officially opens due to real funds entering. If it continues to rise, I may personally observe it a bit more.
The focus of on-chain data remains on the stock held on exchanges. In the past week, it is evident that although Bitcoin's price has fluctuated, the stock on exchanges continues to decrease. Last week, although BTC also declined, the main decline was only from Kraken, with even Coinbase's reduction being minimal, while Binance and OKX were in a state of accumulation. A week later, this situation has still seen some changes.
First, both Binance and OKX, which saw net inflows last week, have turned into net outflows this week, indicating that users have started to withdraw significant amounts from these two exchanges. Even during times of high price volatility, the withdrawal volume remains considerable, while Coinbase continues to show little change. This reflects a certain fatigue among U.S. investors regarding the current Bitcoin market. Kraken, which had the highest outflow last week, is now also facing some selling pressure, but it is not severe.
Additionally, this week I am paying particular attention to the BTC inventory on UpBit. Currently, UpBit's inventory (170,000 BTC) is close to Kraken's (160,000 BTC). Based solely on the already recorded BTC inventory, UpBit has managed to squeeze into the top four, only behind Coinbase (910,000 BTC), Binance (660,000 BTC), and Bitfinex (360,000 BTC). Moreover, UpBit's user base is relatively homogeneous, making it easier to observe the buying and selling sentiment of Korean investors towards BTC. Although there appears to be a significant increase in holdings, this is primarily due to the low volatility of BTC on UpBit. In reality, there has only been an increase of about 100 BTC in selling pressure in the last 24 hours, indicating that Korean investors' sentiment remains quite stable.
From the trading volume data, neither Coinbase, Binance, nor IBIT shows any significant improvement; in fact, there has been a slight decrease compared to before. This indicates that current investors are beginning to feel fatigued with the current price levels. The market is primarily waiting for a clear outcome regarding the competition between Trump and the Federal Reserve. If Trump wins, leading the Fed into a phase of rapid rate cuts, there could still be potential for economic growth before the midterm elections. However, if the Fed maintains a conservative and steady stance, the earliest we could see rapid rate cuts would be next June.
The first major confrontation will likely be the September interest rate meeting and the dot plot. The dot plot for 2025 and 2026 is of utmost importance to Trump, as it will reveal how much influence he has within the Federal Reserve. The market is essentially waiting for this event.
Not only BTC, but we also saw a downward trend in trading volume for ETH last week, and this week's data is even worse. The secondary market for spot ETFs is slightly better, but both the primary market and the spot market have shown very clear declines. In the primary market, over 170,000 ETH flowed out last week, while the previous week saw a net inflow of over 220,000 ETH. The spot market has visibly shrunk in trading volume. The rise in ETH is fundamentally reliant on continuous purchasing power, and when purchasing power is insufficient, prices will show a significant decline.
In the past week, SBET did not buy new ETH as reserves, but BMNR continued to purchase over 200,000 ETH, bringing its total holdings to over 2 million ETH. This amount has surpassed Grayscale's ETH holdings, second only to BlackRock's 3.66 million ETH. However, large purchases by BMNR and MSTR are primarily made through the OTC market, which does not significantly impact spot prices.
If we look at the net flow data for BTC and ETH on exchanges from a different perspective, it becomes clearer. Recently, the withdrawal volume of BTC from exchanges has shown a significant decline, which aligns with our findings of decreased BTC purchasing volume. However, ETH does not show a clear downturn in exchange inventory; withdrawal volumes remain very strong, and it is evident that selling pressure for ETH is decreasing. Combining this with trading volume data from both primary and secondary markets, it is likely that investors are increasing their positions by buying on dips, while there are not many willing to chase higher prices.
Next, regarding long-term holders of BTC who have held for over a year, although I mention this data weekly, I have some doubts about its reliability. This is simply because this data has never been wrong historically, so it remains one of my reference points. Currently, long-term holders are continuing to sell. Based on past experience, when long-term holders enter a selling phase, BTC prices often correspond to peaks. Moreover, signs indicate that the selling by long-term holders has not yet ended, suggesting that the stability of BTC prices should still be relatively good.
Next is the distribution of BTC holdings among investors. In the past two weeks, both high-net-worth investors holding more than 10 BTC and small-scale investors holding less than 10 BTC have been increasing their positions, especially the small-scale investors who have been increasing rapidly. However, after a week, BTC prices have not changed significantly, but small-scale investors have shifted from increasing their holdings to significantly reducing them, while high-net-worth investors continue to hold. More and more BTC is flowing into the hands of those who are not short of money, and this group of high-net-worth investors rarely participates in trading.
Finally, regarding the URPD data, I have readjusted the sixth support level this week. It is currently set between $104,500 and $110,500, which is clearly a very stable support zone. Even with a few negative events, it has held up well, and this range also contains the most BTC holdings, with over 2 million BTC concentrated here, indicating strong support. I personally estimate that before September 18, as long as there are no new systemic negative events, the probability of this support level being broken is low. After the 18th, it will depend on market sentiment.
In summary, although the macro data in the past week has not been favorable for the economy, the market is leaning towards a quick rate cut. Therefore, bad data is often treated as good news, and although the trends for BTC and other cryptocurrencies are not particularly ideal, U.S. stocks remain strong. Currently, BTC and U.S. stocks are still highly correlated; as long as U.S. stocks, especially tech stocks, remain stable, BTC will also be relatively stable. The main competition in the current market is still between the Federal Reserve and Trump regarding interest rates, with the market leaning more towards Trump. The upcoming PPI and CPI data in the next two days may not have a significant impact on the market.
Related: Opinion: The Future of Cross-Chain Cryptocurrency Depends on Regulatory Preparedness
Original text: “U.S. Economic Weakness Fuels Rate Cut Expectations as Markets Swing Between Inflation and Recession Fears”
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