Crypto Sentiment Shifts to “Greed”
On Saturday, the sentiment within the cryptocurrency market shifted to “Greed” as the market experienced a surge, following dovish remarks made by 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” reading of 50. This shift occurred after a brief dip into Fear earlier in the week.
This rebound followed Powell’s speech at the annual Jackson Hole economic symposium on Friday, where he stated that the current conditions regarding inflation and the labor market “may warrant adjusting” the Fed’s monetary policy stance.
In the aftermath of Powell’s address, Bitcoin (BTC) rose by 5% to $117,300, resulting in the liquidation of $379.88 million in shorts. At the same time, Ether (ETH) regained its all-time high from 2021, hitting $4,878, and peaking at $4,851, which signifies an 11.51% increase over the past 24 hours, as reported by CoinMarketCap.
On the same day, Axie Infinity co-founder Jeffrey “Jiho” Zirlin expressed in an X post that Ether is the “most rate-sensitive aspect of crypto.”
“As interest rates drop, the spread between what can be earned by depositing your stablecoins in DeFi vs. depositing your USD in a bank widens,” he elaborated.
Per the CME FedWatch Tool, 75% of market participants expect a rate cut during the Fed meeting on September 17. Trading resource The Kobeissi Letter noted, “It appears Fed Chair Powell is setting the stage for a September rate cut.”
Historically, cuts to Fed rates tend to increase liquidity, making riskier assets, such as crypto, more appealing.
Nonetheless, St. Louis Fed President Alberto Musalem informed Reuters on Friday that he requires more time to determine whether he will back an interest rate cut.
“I will be updating my outlook and balance of risks all the way up and until two days, three days before the meeting,” he stated.
Earlier in the week, various crypto market participants hinted at a potential market spike should Powell suggest a rate cut.
Author Jason Williams remarked on Wednesday that if Powell “comes in soft and leans that rate cuts are likely, we turbo rip.”
Crypto Banter trader Ran Neuner added, “Jackson Hole will shape crypto’s direction moving forward,” followed by, “Trump is pushing for a rate cut with good reason, but will Powell listen?”
