A prominent crypto sentiment tracker moved back into the Greed category on Saturday following a hint from Fed Chair Jerome Powell about a potential rate cut in September.
Following dovish remarks from U.S. Federal Reserve Chair Jerome Powell that fueled speculation of a potential rate cut in September, crypto sentiment shifted back to “Greed” on Saturday as the crypto market surged.
The Crypto Fear & Greed Index, which gauges overall crypto market sentiment, increased to a “Greed” score of 60 on Saturday, a rise of 10 points from Friday’s “Neutral” score of 50. This surge followed a brief dip into the “Fear” zone earlier in the week.
The upturn occurred after Powell’s address at the annual Jackson Hole economic symposium on Friday, during which he stated that the prevailing conditions in inflation and the labor market “may justify adjusting” the Fed’s current monetary policy.
Ethereum (ETH) is a “most rate-sensitive” crypto asset, analyst says
Following Powell’s speech, Bitcoin surged 5% to $117,300, leading to the liquidation of $379.88 million in short positions. Simultaneously, Ether, according to CoinMarketCap, reclaimed its 2021 all-time highs of $4,878, reaching a peak of $4,851, which represented an 11.51% increase over a 24-hour period.
In an X post from the same day, Axie Infinity co-founder Jeffrey “Jiho” Zirlin referred to Ether as 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 said.
Based on the CME FedWatch Tool, a rate cut at the September 17 Fed meeting is anticipated by 75% of market participants. Trading resource The Kobeissi Letter noted that “It seems Fed Chair Powell is preparing the groundwork for a September rate cut.”
It has been historically observed that Fed rate cuts lead to an increase in liquidity, which in turn makes riskier assets such as crypto more appealing.
Crypto market rally was anticipated by many participants
Nonetheless, St. Louis Fed President Alberto Musalem informed Reuters on Friday that he still required more data before making a decision on whether to 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 said
Earlier in the week, a number of crypto market participants anticipated a crypto market surge if Powell hinted at a rate cut.
On Wednesday, author Jason Williams stated that if Powell “comes in soft and learns that rate cuts are likely, we turbo rip.”
Ran Neuner, a trader from Crypto Banter, stated that “Jackson Hole will determine crypto’s future direction,” and then questioned, “Trump is advocating for a rate cut for good reason, but will Powell comply?”
