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Welcome to the On the Margin Newsletter, brought to you by Ben Strack, Casey Wagner and Felix Jauvin. Here’s what you’ll find in today’s edition:

• After digging through the latest FOMC meeting minutes, Felix shares his notable findings

• Casey preps you for what could be Fed Chair Jerome Powell’s most important speech of the year

• Ben explores the BTC price milestones that could signal a breakout upward

FOMC meeting minutes takeaways

Yesterday, we received minutes from the FOMC’s meeting in July. Overall, they painted a more dovish picture than what even Fed Chair Jerome Powell’s press conference characterized: 

Shift from inflation to employment

Since early June, there’s been a steady shift in forward guidance from the FOMC. They have shifted their focus from solely on inflation to a more balanced approach — considering their dual mandate of inflation and employment. During the FOMC meeting, we see them emphasize that inflation risks have diminished, whereas downside risks to employment have increased. 

What this guidance translates to in terms of relevant economic data is that the U3 Unemployment Rate (UR) is a more relevant indicator for perceiving monetary policy than CPI. 

With the UR (4.3%) already above the Fed’s year-end forecast (4.1%), any further deterioration in the labor market will be the key trigger to further rate cuts from the Fed moving forward.

The Fed nearly cut in July

Even though Fed funds futures going into the July FOMC meeting had a July cut at a 0% probability, the minutes clearly indicate there were members that wanted to cut that day:

This took the market by surprise, as during the press conference Chair Powell painted a picture of an FOMC aligned on waiting until September to cut, if at all.

The Fed is aware of the labor data issues

There’s been a lot of talk in recent weeks about how labor market data may be overstated due to elevated immigration in the past 12 months. The climax of this situation came when the Bureau of Labor Statistics (BLS) revised its jobs data down by about 818,000, the largest downward revision since 2009:

As we see in the FOMC minutes from a month ago, the committee is more than aware of this situation. Despite many market commentators worried this data will lead to the Fed easing too aggressively too soon, it's clear they have considered this dynamic into their monetary policy calculus:

Looking ahead to Powell’s speech tomorrow at the Jackson Hole Symposium — where many expect him to guide on the size of cuts that will occur in September — these insights provide a glimpse of a more-dovish-than-previously-thought Fed. They’re a good indication of which direction Powell is leaning heading into his Friday address.

— Felix Jauvin

The number of crypto products Grayscale Investments now offers (excluding its slate of bitcoin and ether ETFs). 

Grayscale on Thursday unveiled its Avalanche Trust — the latest in a string of private placement product launches in recent weeks. 

The new offering gives accredited investors exposure to AVAX, “a three-chain smart contract platform designed to simultaneously optimize for scalability, network security and decentralization,” the company notes.

This launch follows Grayscale adding trusts focused on MakerDAO (MKR), Bittensor (TAO) and Sui (SUI) earlier this month.

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As Felix alluded to, Fed Chair Jerome Powell is slated to give what will likely be his most important speech of the year on Friday from Jackson Hole. 

Market participants will be hoping for assurance from the central bank head that interest rates will start to come down in September. That hope is perhaps more pronounced after new data this week fueled concerns that the Fed’s coveted “soft landing” may not be achievable after all. 

The BLS on Wednesday released preliminary data suggesting the economy added 818,000 fewer jobs in the 12 months ended March 2024 than were initially reported. This is almost 30% lower than originally relayed and the largest revision since 2009. 

The alteration comes after the unemployment rate increased to an unexpected 4.3% last month — the highest rate since October 2021. 

“Despite the downward revision, the broader economic indicators, such as GDP and jobless claims, suggest the economy is not in the same dire state as during the 2009 recession,” Bitfinex derivatives head Jag Kooner said. “This mixed data could result in Powell maintaining a cautious tone, emphasizing the Fed’s data-dependent stance.” 

We know Powell loves a data-dependent stance. He also tries to avoid surprising markets, but — as we’ve said before — he’s not concerned about your brokerage account. 

I highly doubt Powell will give any indication about the size of an interest rate cut — that is, if he hints one is coming in September at all. He’s said for months that FOMC members are taking things one day and one data point at a time, so I wouldn’t hold your breath for any concrete promises tomorrow. 

Fed funds futures markets on Thursday afternoon were pricing in a 75% chance of a 25-basis point rate cut in September, according to data from CME Group. Powell’s keynote address is slated to kick off on Friday at 10 am ET.

— Casey Wagner

Those following the crypto market movements this week should know: They are “not notable.”

This is according to Philippe Bekhazi, CEO of crypto services platform XBTO. The moves simply reflect the summer range trading strategies playing out, he said. 

BTC rose to about $61,400 earlier today, but was trading at $60,160 at 2 pm ET — still up 2.5% from seven days ago. 

“The true signifier of a bull market period will be once bitcoin decisively breaks $62,000,” Bekhazi said. “And then following that, $72,000 will cement the market into a new trading pattern.”

$62,000 is a technical level that has shown resistance in the market, he noted — a mark Rekt Capital has also highlighted on X in recent weeks. 

A rise to $72,000 would be approaching the all-time high set in March. 

“At the moment, there is a lot of outstanding interest in holding short positions, but if it becomes more fruitful to hold the asset long term, Bitcoin’s price could rise,” he said. “Additionally, Fed rate changes could be a huge factor.”

CryptoQuant analyst Burak Kesmeci noted in a blog post that investors holding BTC in their wallets for between one and three months have an average cost-basis of about $64,200. That goes up to roughly $65,900 for those holding the asset for between three and six months. Thus, the $64,000-$66,000 range represents a “strong resistance level,” he added.

“When short-term holders start closing their losses and moving into profit, they will likely share their success stories,” Kesmeci wrote. “These stories have the potential to attract new investors to Bitcoin.” 

Grayscale Investments research head Zach Pandl is looking at a similar range. Traders are likely to focus on the bitcoin level between $65,000 and $67,000 to confirm prices are breaking out of the channel held since mid-March, he told Blockworks.

Pandl added: “The best outcome for valuations … would be positive comments from the Harris/Walz campaign about the crypto industry, net inflows into the new Ethereum ETPs, and no further deterioration in US labor market conditions.”

— Ben Strack

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• Franklin Templeton’s tokenized money market fund is now available on the Avalanche network, the company revealed Thursday. Launched in 2021, the US-registered  mutual fund broke new ground by using a public blockchain to process transactions and record share ownership. The fund managed $420 million in assets, as of July 31.

• Former President Donald Trump on Thursday endorsed “The DeFiant Ones,” a DeFi project led by his sons Donald Jr. and Eric Trump. The endorsement came via a post on Truth Social. Additional details about the crypto project have yet to be released. 

• Crypto industry lobbyist Michelle Bond has been charged with campaign finance law violations. Bond is the girlfriend of former FTX executive Ryan Salame, who pleaded guilty in 2023 to charges of conspiracy to defraud the Federal Elections Committee and operating an unlicensed money transmitting business. The charges come a day after Salame’s attorneys filed a brief accusing prosecutors of misconduct for allegedly violating terms of his plea agreement to not bring charges against Bond.