Despite Hitting a New All-time High & Dovish Tones from the Fed, Bitcoin Corrects to Close Out August

While the summer months are usually not the busiest, the second half of August was full of surprises. Here’s what happened… 

TL;DR

• Jerome Powell turned dovish, and rate cuts are potentially on the menu for September.

• That drove Bitcoin higher, but the rally was short-lived as Bitcoin’s seasonality once again reminded us that August hasn’t historically been the best month for HODLers. 

• Brazil held its first hearing on a $19 billion Bitcoin reserve, with potential approval pending. 

• Japan’s finance minister speaks out in favor of crypto and wants to establish a better environment for investors to operate in. 

Jerome Powell’s Dovish Tones Gave Crypto a Boost Before Bitcoin’s Seasonality Kicked In 📉

If you’ve been around long enough, you know that seasonality is a thing in Bitcoin. 

After all, Bitcoiners invented the term “Uptober.” 😊 

August has been a historically weak month for Bitcoin. Although it’s not as significant as September, as shown in the chart below by Bitwise, price dips have occurred regularly in the past 15 years to mark the end of summer.  

Interestingly, Bitcoin closed August in the red despite hitting a new all-time high in the middle of the month and the Fed’s dovish outlook for the coming month. 

Jerome Powell took the stage in Jackson Hole for the Kansas City Federal Reserve’s economic summit. There, it didn’t take long for him to respond to questions about the potential for a rate cut. 

“With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” he said. 

This paves the way for a potential Fed rate cut in September, as Powell isn’t optimistic about the economy currently, and the ongoing tariff situation. 

He even stated that they could potentially abandon the 2% inflation goal. Talk about something you definitely didn’t have on your bingo card! 

Once Powell made his dovish comments, the digital asset market went bonkers.

Within a span of 24 hours, almost every coin absolutely ripped or, in the case of Ether (ETH), even reached a new all-time high. 

However, that hype was short-lived… 

Once the initial euphoria of the Powell comments cooled off, and seasonality kicked in, Bitcoin dropped significantly. 

Bitcoin finished the month down 5.3% at $108,500.  

Other cryptocurrencies were able to finish the month in the green, but a substantial amount of the initial gains after Powell’s comment also vanished. 

However, this is nothing out of the ordinary, as you can see in the Bitwise data above. 

There are some months in Bitcoin when it’s absolutely booming, and then there are months when things cool off. 

And who knows, with the next Fed meeting just a few weeks away, we might be in for another fun ride. 

Brazil Holds First Hearing on Potential Bitcoin Reserve 🇧🇷

It’s been a few months since I last wrote about Bitcoin and Brazil. 

However, this time around, there’s an exciting update! 

In November 2024, Brazilian Congressman Eros Biondini proposed a bill to convert 5% of Brazil’s national reserves into Bitcoin. That would be anywhere between $18.5 billion and $19 billion! 

Fast forward to today, and we have already had the first hearing on the matter before the Chamber of Deputies' Economic Development Commission. 

Deputy Luiz Philippe de Orleans e Bragança was the one who initiated the hearing and was keen to invite technical experts for a healthy debate. 

Now that the first hearing is over, it will move to four more committees for a vote. If all these committees approve the bill, it will be sent to Congress for a vote. 

While this is the first step in a long and rigorous process to establish a Bitcoin reserve, it’s still a very positive sign to see out of Brazil. 

If the largest economy in South America were to establish such a reserve, it could also motivate other countries to follow suit. 

Is the Japanese Government Changing Its View on Bitcoin? 🇯🇵

Japan’s Finance Minister, Katsunobu Kato, endorsed crypto as a portfolio diversifier and pledged to create a better environment for investors to operate in. 

According to a Bloomberg Japan piece, Kato acknowledged digital assets in a speech at a Web3 conference in Tokyo. 

He said: “While crypto assets carry the risk of high volatility, by establishing a proper investment environment, they can become an option for diversified investment.” 

Additionally, he stated that the user base of investors allocating towards these instruments is growing at a rapid pace, and he intends to focus on creating a sound trading environment. 

This is good news for any investor in Japan, as taxes on crypto gains can be as high as 55% in Japan. Any reduction on that front would be a welcome sight in the Japanese Bitcoin investor community.  

I’ll be keen on following how this story develops and would celebrate more Bitcoin holders in Japan. 😎

Your fellow stacker in Sats, 

Patrick Lowry

Disclaimer: The opinions expressed in this newsletter are solely those of the author and do not necessarily represent the views of any associated company. This newsletter is for educational and informational purposes only and should not be construed as investment, financial, or any other professional advice. Investing in cryptocurrencies is highly speculative and carries a significant risk of substantial financial loss, so you must conduct your own thorough research and consult with independent professional advisors before making any decisions.