New all-time highs have yet to break through convincingly

From “banana republic” to “exporting madness”

The term “banana republic” originated in early 20th century Central America as a derogatory label for countries economically dependent on a single export product. Such dependence was thought to create political instability and open the door to authoritarianism.

Today, the term has become applicable far beyond Central America. In fact, the US seems to have found its own singular “export product”: signals of outright madness.

Bad news = good news, and vice versa

August was dominated by economic data. The month began with a surprising jobs report out of the US. Non-farm payrolls, a key measure of new jobs created, came in at just 73,000 compared to expectations of 110,000. To make matters worse, figures for May and June were sharply revised downward — from an initially reported 291,000 jobs to just 33,000.

Figure 1: Non-farm payrolls in thousands over the past year

At first glance, bad news. A weakening labor market suggests slowing economic activity. But it also makes the Federal Reserve more inclined to stimulate the economy through rate cuts. The odds of a September rate cut jumped from just 38% to a whopping 95% after the report.

Good news for President Trump, one might think. But not quite. Because while lower rates may be coming, the implication that the economy is faltering under his leadership is politically unpalatable. His solution? Accuse the head of the Bureau of Labor Statistics of sabotage — and fire him on the spot. A textbook example of America’s new export product.

Inflation as the bogeyman

Ironically, this madness turned out to be supportive of crypto markets. Bitcoin rose from $112,000 at the start of August to a new record high around $124,500 in just two weeks. Crucially, this surge wasn’t accompanied by heightened volatility. The stability of price movements suggests there is no bubble about to burst.

Still, the streak of printing new all-time highs has yet to convincingly continue. The turning point came mid-August, when inflation numbers disappointed. Producer prices rose 3.3% year-on-year, well above the expected 2.5%. These may be the first signs of import tariffs feeding through to higher prices — which could ultimately hit consumers and weigh on broader financial markets.

Powell hints at a rate cut

As for those tariffs, August was relatively quiet. Between the questionable mobilization of the National Guard in Washington D.C. and his self-nominations for the Nobel Peace Prize, President Trump still found time to extend the tariff pause with China by 90 days.

This provided relief for inflation fears, and even Trump’s archrival at the Fed seemed reassured. Speaking at Jackson Hole, Fed Chair Jerome Powell stated it was clear how tariffs were affecting inflation — implicitly signaling confidence that inflation wouldn’t spiral further. The focus, he stressed, should now be on supporting the labor market through accommodative (dovish) policy. And it was precisely the hope of a 25 basis point rate cut that gave risk markets a late-month boost.

That said, political pressure on the Fed remains intense. In August, Trump turned his fire on Fed Governor Lisa Cook, sacking her over alleged mortgage fraud. How this saga unfolds remains to be seen, but it is already clear that central bank independence in the US is anything but guaranteed — with all the potential consequences for markets, both positive and negative.

Strong inflows and record high for ether

Crypto markets themselves remained relatively calm in August. News was still dominated by the wave of Digital Asset Treasury companies continuing their accumulation programs. Ether was the main beneficiary, with firms like Bitmine Immersion Tech now controlling nearly 1.5% of the total ether supply.

Figure 2: Cumulative ETF flows for bitcoin and ether in billions of dollars since February 2025

As a result, ether surged to just shy of $5,000, breaking a price record that had stood for nearly four years. Measured in bitcoin, ether also rose about 27%, marking a clear end to its multi-year downtrend. This shift was mirrored in ETF flows: bitcoin ETFs recorded roughly $600 million in outflows, while ether ETFs saw inflows of around $4 billion. We expect this to herald broader interest in ether and other altcoins in the months ahead.

What we will be watching in September

In the coming month, we’ll be looking for answers to these questions:

• Will Powell maintain his dovish stance?

• Will US labor market weakness dampen sentiment in risk markets, or will optimism around rate cuts continue to dominate?

• Will ether’s outperformance over bitcoin spark a broader revival in the altcoin market?