Alternative currencies lose $50 billion
Key points
Financial markets have seen a risk-averse stance ahead of the Federal Open Market Committee meeting, with alternative currencies and major meme coins dropping between 3% and 10%. However, one analyst predicted a potential bullish catalyst ahead of the inflation data release and the White House report on cryptocurrencies.
A few hours before the U.S. Federal Open Market Committee meeting to cut interest rates, the cryptocurrency market experienced a slight decline in risk, particularly among alternative currencies.
However, there were other economic data and expected updates that could impact cryptocurrencies more this week.
The selling of alternative currencies followed the sharp decline in Bitcoin [BTC] to $116.95 thousand on July 29.
However, as of the time of publishing this report, Bitcoin has returned to over $118 thousand, but alternative currencies have yet to establish a clear direction ahead of the Federal Reserve's interest rate decision.
Will alternative currencies recover after the Federal Reserve's interest rate decision?
Over the past 24 hours, Bonk [BONK] topped the selling list with a 10% drop, while Pepe [PEPE] and Dogecoin [DOGE] fell by 4% and 3% respectively.
Interest rate cuts by the Federal Open Market Committee
Source: CryptoRank
Among the top-tier layer one chains, Binance [BNB] fell by 3%, followed by Cardano [ADA] by 2.6% and Solana [SOL] by 2.2%.
The total alternative currency market lost $50 billion over the past 48 hours after dropping from $1.57 trillion to $1.52 trillion.
During the same period, risk alleviation also led to a slight decrease in total open interest (OI) across all exchanges and all crypto assets, from $101 billion to $97 billion.
Interest rate cuts by the Federal Open Market Committee
Source: Coinalyze
In particular, the total direct investment in major alternative currencies (ETH, SOL, XRP, DOGE) shrank from $42.5 billion to $41 billion, confirming that some traders chose margin ahead of the expected volatility during the Federal Reserve's interest rate decision.
Ripple [XRP] alone has seen a loss of over $2 billion in direct investment in the past seven days of trading, reinforcing the risk-averse narrative.
Interest rate cuts by the Federal Open Market Committee
Source: Glassnode
Potential next catalysts for alternatives
However, Matt Mina, a cryptocurrency research strategist at 21Shares Asset Management, maintained a somewhat bullish outlook ahead of the Federal Reserve's interest rate decision and the expected core inflation data (PCE) on August 2.
In a statement, Mina said that the Federal Reserve will keep interest rates steady in July, but there is a higher likelihood of a 25 basis point rate cut in September, which could lead to a rise in Bitcoin's price.
"But the road after July has become more open: the market sees a 61.6% chance of a rate cut in September, and the chances of two cuts by the end of the year are now 42.9%."
Regarding the inflation data released on Thursday, the White House report on cryptocurrencies, and the potential impact, Mina added:
"If Friday's PCE reading comes in weak - and if the crypto policy report provides real substance - BTC could quickly reclaim $120 thousand and head towards price discovery.
