According to Santiment's market sentiment analysis platform, discussions on social media have surged following the 'dovish' speech by Federal Reserve Chairman Jerome Powell at the Jackson Hole conference.
Ethereum (ETH) is in the spotlight as it reached a new ATH of $4,957, while Bitcoin (BTC) maintains above $110,000. Chainlink (LINK) also made its mark by climbing to $27.11 - its highest since the beginning of the year, before slightly correcting at the time of writing.
This trend clearly reflects the impact of Powell's monetary policy easing signals, which once again sparked the familiar 'buy the rumor' wave among cryptocurrency investors.
The interconnectedness between digital assets and traditional markets has also become clearer as the S&P 500 index reached a new historical peak, alongside the upward trend of Bitcoin and gold - highlighting the market's sensitivity to moves from the Fed.
Notably, social sentiment data shows that just before the recent rise, the level of pessimism among retail investors had dropped to its lowest since July - a signal that often indicates the market is about to hit a bottom and enter a recovery cycle.
Excitement mixed with risk
Nevertheless, a cautious atmosphere still envelops the market, as the frequency of discussions surrounding the keywords 'Fed', 'interest rates', and 'cut' has risen to its highest level in 11 months. This is a signal reflecting the intertwining of excitement and concern in the face of a potential rate cut scenario.
Santiment analytics platform warns:
"History shows that when a bullish story becomes too strong a topic of discussion, it often signals the market is entering an extreme state of euphoria - and the risk of forming a short-term peak is hard to avoid."
On-chain data combined with market sentiment is painting a multi-faceted picture.
With Bitcoin, social media discussions are flooded with optimism, but core performance indicators are not very encouraging: the number of active addresses and trading volume are on a downward trend, while supply on exchanges is increasing, subtly signaling that selling pressure may rise.
In contrast, Ethereum still retains growth potential, although both short-term and long-term MVRV are signaling the need for caution. Notably, fundamental indicators such as Mean Dollar Invested Age and exchange supply are decreasing, indicating that the trend of accumulation and long-term holding still prevails.
Opinions from analysts
Santiment's chief analyst commented:
"Ethereum is on the verge of a major breakout to its historical peak, heading straight towards the $5,500 milestone - especially as widespread FOMO sentiment has yet to explode."
However, he also warns:
"The biggest risk to the market still revolves around the Fed story. If any signals emerge that contradict expectations for a rate cut, a sharp correction could occur immediately."
In agreement, David Duong - Head of Research at Coinbase - believes that a rate cut will pave the way for strong liquidity inflows into the cryptocurrency market. The reason is that when money market funds become less attractive, liquidity will shift, while M2 money supply expands.
He points out that, although stocks and cryptocurrencies are both growing, money market funds still hold up to $7.4 trillion. This figure reflects the cautious sentiment of retail investors, who are still hesitant about risks from fiscal policies.
"Many investors are still holding cash on the sidelines, waiting for clearer signals about risk tolerance," Duong said. "But once the Fed actually cuts interest rates, this skeptical price increase could move into a breakout phase."
From another perspective, The Kobeissi Letter predicts Chairman Powell may cut interest rates within the next month, citing the weakening labor market, despite the Producer Price Index (PPI) being at a three-year high and the Consumer Price Index (CPI) remaining above 2% for 53 consecutive months. This could become a catalyst for retail funds to flow back into risk assets.
Kobeissi emphasizes:
"Not holding assets? You'll be left behind."
Outlook Ahead
As the cryptocurrency market flourishes, signals from officials - particularly the calls for tighter oversight of digital assets from Fed Vice Chair Michelle Bowman - emphasize that data-driven decisions will continue to play a key role, as the market watches every move the Fed makes.