The recent uptick in social media discussions regarding the eagerly awaited US Federal Reserve interest rate decision for September may signal potential challenges for the cryptocurrency sector, according to the sentiment analysis platform Santiment.
This comes on the heels of a cryptocurrency market rally on Friday, with market sentiment shifting to a state of greed following Fed Chair Jerome Powell’s optimistic comments at the annual Jackson Hole economic symposium. He suggested that the first rate cut of 2025 might occur in September.
“Historically, a significant surge in conversations around a particular bullish theme can indicate an overabundance of euphoria and might point towards a local peak,” Santiment stated in a report on Saturday. They noted that mentions of keywords associated with the Fed and interest rate cuts have surged to the highest levels seen in 11 months.
Santiment advises caution amidst mixed analyst opinions
“While optimism surrounding a potential rate cut is energizing the market, social sentiment indicates that caution is advisable,” Santiment remarked.
During his Friday speech, Powell mentioned that current inflation and labor market conditions “might necessitate adjustments” to the Fed’s monetary policy. According to the CME FedWatch Tool, 75% of market participants foresee a rate cut at the upcoming September meeting.
Various crypto analysts have relied on the Fed’s decisions for their market forecasts this year. While some view a rate cut as a potential bullish driver, opinions on the outcome remain mixed.
Following Powell’s address, trader Ash Crypto proclaimed that “the Fed will initiate the money printers in Q4 of this year,” along with two anticipated rate cuts, suggesting that “trillions will flow into the crypto market.”
“We are on the brink of a parabolic phase where Altcoins could surge 10x -50x,” Ash Crypto expressed.
Analysts caution about potential short-term pressures on crypto
Conversely, some analysts believe that the effects of a Fed rate cut may not be immediately felt in the crypto market.
On April 11, Markus Thielen, head of research at 10x Research, stated, “Expecting a bullish impulse is premature.” He pointed out that while Bitcoin (BTC) might present long-term opportunities, it could face short-term challenges driven by recession concerns.
Related: BTC rose to 1.7% of global money before the Fed chair hinted at a rate cut
Meanwhile, some analysts warn that if the Fed refrains from action this year, it could create obstacles for the crypto market.
On March 9, network economist Timothy Peterson cautioned that if the Fed delays rate cuts in 2025, it may trigger a broader downturn in the crypto market.
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