The increase in social media conversations surrounding the eagerly awaited US Federal Reserve interest rate decision in September may signal trouble for crypto, according to sentiment platform Santiment.
This follows a rally in the crypto market on Friday, where market sentiment shifted to greed after Fed Chair Jerome Powell’s dovish comments at the annual Jackson Hole economic symposium, where he hinted that the first rate cut of 2025 could occur in September.
“Traditionally, a major surge in discussions surrounding a single optimistic narrative can suggest that euphoria is becoming excessive and might indicate a local peak,” Santiment stated in a Saturday report. The firm noted that social media mentions of terms related to the Fed and interest rate cuts have surged to their highest level in 11 months.
Santiment advises caution as analysts hold differing views
“While the optimism surrounding a rate cut is driving the market, social data indicates that caution is advisable,” Santiment mentioned.
During his Friday speech, Powell indicated that present conditions concerning inflation and the labor market “might necessitate adjustments” to the Fed’s monetary policy. According to the CME FedWatch Tool, 75% of market participants anticipate a rate cut during the September meeting.
Numerous crypto analysts have formulated their market predictions based on the Fed’s decisions this year. While some view a rate cut as a potentially bullish impetus, others are divided regarding the implications.
Following Powell’s speech, crypto trader Ash Crypto claimed, “the Fed will commence the money printing in Q4 of this year,” along with two rate cuts, which implies “trillions will flow into the crypto market.”
“We are on the brink of entering a parabolic phase where Altcoins will surge 10x -50x,” Ash Crypto asserted.
Analyst cautions that crypto may encounter short-term challenges
Others argue that the immediate effects of a Fed rate cut on the crypto market may not be apparent.
On April 11, 10x Research head of research Markus Thielen stated, “Anticipating a bullish impulse is premature.” He expressed that, while a long-term price opportunity for Bitcoin (BTC) might arise, it could face short-term challenges due to recession concerns.
Related: BTC rose to 1.7% of global money prior to Fed chair signaling rate cut
Conversely, some believe that if the Fed opts not to act this year, it could create challenges for the crypto market.
On March 9, network economist Timothy Peterson warned that if the Fed refrains from rate cuts in 2025, it could result in a broader downturn in the crypto market.
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