Crypto Market Sentiment Turns to 'Greed' Amid Fed Rate Cut Hints
Crypto Market Enters 'Greed' Territory on Fed Speculation
Crypto market sentiment shifted back into “Greed” territory on Saturday, driven by positive momentum following dovish signals from U.S. Federal Reserve Chair Jerome Powell. His remarks have increased speculation about a potential interest rate cut as early as September.
The Crypto Fear & Greed Index, a key indicator of overall market sentiment, jumped to 60 on Saturday, a 10-point increase from Friday’s “Neutral” reading of 50. This rebound follows a brief dip into “Fear” earlier in the week.
Powell's comments, made at the annual Jackson Hole economic symposium on Friday, suggested that current inflation and labor market conditions “may warrant adjusting” the Fed’s monetary policy stance.
Market Reaction: Bitcoin and Ether Surge
Following Powell’s speech, Bitcoin (BTC) experienced a 5% surge to $117,300, resulting in the liquidation of $379.88 million in short positions. Ether (ETH) also saw significant gains, reclaiming its 2021 all-time high and reaching as high as $4,851, an 11.51% increase over 24 hours.
Jeffrey “Jiho” Zirlin, co-founder of Axie Infinity, noted on X that Ether is the “most rate-sensitive aspect of crypto.” He explained that decreasing interest rates widen the gap between DeFi stablecoin deposit yields and traditional bank USD deposit yields.
The CME FedWatch Tool indicates that 75% of market participants expect a rate cut at the Fed meeting on Sept. 17. The Kobeissi Letter commented, “It appears Fed Chair Powell is setting the stage for a September rate cut.”
Historically, Federal Reserve rate cuts tend to increase liquidity and make riskier assets, such as cryptocurrencies, more appealing to investors.
Conflicting Signals from the Federal Reserve
Despite the prevailing sentiment, St. Louis Fed President Alberto Musalem stated that he requires more data before committing to supporting an interest rate cut. He intends to evaluate his outlook and risk assessment until shortly before the meeting.
Earlier in the week, some crypto market observers anticipated a market rally if Powell hinted at potential rate cuts.
Jason Williams commented on Wednesday that a “soft” stance from Powell, indicating likely rate cuts, would trigger a “turbo rip” in the crypto market. Ran Neuner of Crypto Banter added that “Jackson Hole will shape crypto’s direction moving forward,” questioning whether Powell would heed calls for a rate cut.