On Saturday, crypto sentiment shifted back to “Greed” as the market rallied, spurred by dovish remarks from US Federal Reserve Chair Jerome Powell that fueled speculation about a potential rate cut in September.
The Crypto Fear & Greed Index, which gauges overall sentiment in the crypto market, climbed to a “Greed” score of 60 on Saturday, marking a 10-point increase from Friday’s “Neutral” score of 50, after briefly dipping into Fear earlier that week.
This rebound followed Powell’s address at the annual Jackson Hole economic symposium on Friday, where he noted that current inflation and labor market conditions “may warrant adjusting” the Fed’s monetary policy.
ETH is the “most rate-sensitive aspect of crypto”
In the wake of Powell’s speech, Bitcoin (BTC) surged 5% to $117,300, resulting in the liquidation of $379.88 million in short positions. Ether (ETH) also reached its 2021 all-time highs of $4,878, climbing to a peak of $4,851—an 11.51% increase over the previous 24 hours, according to CoinMarketCap.
On the same day, Axie Infinity co-founder Jeffrey “Jiho” Zirlin characterized Ether as the “most rate-sensitive aspect of crypto.”
“As interest rates drop, the gap between what can be earned by depositing stablecoins in DeFi versus putting USD in a bank widens,” he remarked.
The CME FedWatch Tool indicates that 75% of market participants expect a rate cut at the Fed’s meeting on Sept. 17. Trading resource The Kobeissi Letter noted, “It appears Fed Chair Powell is preparing for a rate cut in September.”
Historically, rate cuts by the Fed lead to increased liquidity, making riskier assets such as crypto more appealing.
Crypto market participants were expecting the surge
Nonetheless, St. Louis Fed President Alberto Musalem told Reuters on Friday that he still requires more information before deciding on supporting a rate cut.
“I will update my outlook and balance of risks right up until a couple of days before the meeting,” he stated.
Earlier in the week, numerous crypto market participants anticipated a significant market uptick if Powell suggested a rate cut.
Related: Bitcoin price breakout to $117K liquidates bears, opening door to fresh all-time highs
Author Jason Williams remarked on Wednesday that if Powell’s message is “soft” and indicates likely rate cuts, “we turbo rip.”
Crypto Banter trader Ran Neuner asserted, “Jackson Hole will shape crypto’s future direction,” adding, “Trump is advocating for a rate cut for good reason, but will Powell heed it?”
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