According to Cointelegraph, the cryptocurrency market has seen an increase in sentiment, shifting to 'greed' on Saturday following comments from U.S. Federal Reserve Chair Jerome Powell. His remarks at the annual economic symposium in Jackson Hole indicated a possibility of adjusting the Fed's monetary policy, sparking speculation about a potential interest rate cut in September. These developments led to the cryptocurrency fear and greed index rising to a level of 60, up from a 'neutral' reading of 50 the previous day.
The market's positive reaction was evident as Bitcoin (BTC) saw a 5% increase, reaching $117,300, and Ethereum (ETH) rose to $4,851, nearing its all-time high in 2021. The increase in Ethereum, which rose by 11.51% over 24 hours, was highlighted by Jeffrey 'Jiho' Zirlin, one of the founders of Axie Infinity, who described Ethereum as 'the most interest rate-sensitive aspect of cryptocurrencies.' He noted that as interest rates decline, the gap between yields from stablecoin deposits in decentralized finance (DeFi) and traditional bank deposits widens, making investments in cryptocurrencies more appealing.
Market participants are closely monitoring the upcoming Federal Reserve meeting on September 17, where the CME FedWatch tool indicates that 75% expect an interest rate cut. A message from Kybys, a trading provider, suggested that Powell's comments pave the way for such a move. Historically, interest rate cuts by the Federal Reserve have led to increased liquidity, making riskier assets like cryptocurrencies more attractive to investors.
Despite the optimism, St. Louis Federal Reserve President Alberto Musalem expressed caution, stating that he needs more time to decide on supporting an interest rate cut. He mentioned that he will continue to update his forecasts and assess risks up until a few days before the meeting. Earlier in the week, many cryptocurrency market participants anticipated a market rally if Powell indicated a rate cut. Jason Williams, a cryptocurrency author, speculated that a dovish stance from Powell would lead to a significant market increase. Meanwhile, trader Ran Neuwirth in Crypto Banter emphasized the importance of the Jackson Hole symposium in shaping the future direction of the cryptocurrency market, noting that U.S. President Donald Trump is calling for a rate cut, although it remains uncertain whether Powell will respond to this call.
