Interest Rate Cycle Expectations and Valuation Dynamics Intertwined as Bitcoin Enters Fourth Growth Phase

August presented a compelling case study in how macro sentiment intertwined with crypto asset valuations. Bitcoin experienced a distinctive wave pattern throughout the month—propelled by employment data early on, then dampened by inflation readings, before stabilizing as Federal Reserve commentary shifted dovish. This volatility underscores the intimate connection between monetary policy expectations and digital asset pricing.

The Macro Backdrop: Rate Cut Probability Oscillations

The U.S. economic calendar dominated market psychology in August. When employment figures revealed a unemployment uptick with only 73,000 new jobs added (versus 100,000 anticipated), markets rapidly repriced rate cut odds. FedWatch probabilities for a September cut jumped from 37.7% to 75.5% within a single session. This initial optimism triggered Bitcoin’s ascent toward $124,533—a new all-time high mid-month.

However, subsequent Producer Price Index data (3.3% annualized versus 2.5% expected) introduced uncertainty. Rising production costs threatened to delay monetary accommodation, causing institutional capital to reassess positioning. The divergence in market reactions proved telling: tech-heavy indices weakened while cyclical sectors strengthened, suggesting valuation concerns transcended cryptocurrency alone.

Federal Reserve Chair Powell’s Jackson Hole remarks recalibrated sentiment once more. By month-end, markets had fully priced in a September rate cut scenario, though President Trump’s pressure campaign on the Fed simultaneously raised questions about institutional independence—a development that rippled through risk asset markets.

Capital Migration: The Great ETH Pivot

While Bitcoin attracted $329 million in net inflows during August, Ethereum received $10.805 billion—marking a record monthly allocation. This $10+ billion differential reveals systematic capital reallocation within cryptocurrency markets.

Total August crypto inflows reached $27.778 billion, distributed as follows:

• ETH Spot ETF: $3.420 billion
• ETH corporate acquisitions: $7.485 billion
• Stablecoin inflows: $164.14 million
• SOL ETF: $226 million
• BTC corporate purchases: $1.505 billion
• BTC Spot ETF outflow: -$1.176 billion

This migration pattern intertwined three narratives: (1) Bitcoin’s existing record valuation limiting appeal relative to Ethereum’s unproven cycle highs; (2) blockchain infrastructure gaining mainstream acceptance under a pro-crypto regulatory environment; (3) historical alt-season dynamics emerging in accommodative rate contexts. Altseason, long predicted for late-cycle periods, appears underway as speculative capital rotates downmarket.

Technical Structure: Whale Liquidation and Chip Analysis

Bitcoin’s month-over-month retreat of 6.49% to $108,247.95 reflected more than sentiment alone. Long-term holders—including wallets from the Satoshi era—accelerated distribution, with over 150,000 coins changing hands. This third wave of selling in the current cycle represents genuine profit-taking rather than capitulation, draining scarce liquidity and temporarily pushing prices toward the $90,000-$110,000 “Trump bottom” range.

Notably, this liquidation broke Bitcoin’s 120-day technical line and the primary uptrend established early in the bull run. Exchange outflows totaled 38,620 BTC, slightly below July levels—consistent with bull-phase capital accumulation patterns.

Current spot prices reflect this repricing:

• Bitcoin: $88.24K (+1.00% 24h)
• Ethereum: $2.98K (+0.24% 24h)

Market Outlook: Repricing Complete, Growth Anticipated

EMC Labs’ assessment identifies Bitcoin’s Metric at 0.375, confirming upward relay conditions. The August consolidation appears to represent necessary valuation adjustment rather than cycle disruption. As interest rate cuts commence—currently priced for September delivery—mainstream capital flows should accelerate.

Two dynamics warrant attention heading into Q4. First, elevated U.S. stock valuations remain a brake on risk appetite, particularly if employment data deteriorates. Second, Federal Reserve independence concerns, highlighted by executive pressure campaigns, could trigger volatility. Yet the structural shift toward blockchain-native finance remains intact.

Bitcoin should sustain its fourth growth wave as capital reallocation matures and rate-cut cycle benefits crystallize. Ethereum and alternative assets face amplified volatility given speculative dynamics, yet the infrastructure renaissance underway suggests meaningful repricing potential remains. The correlation between crypto and risk assets will intensify, but directional momentum favors continuation.