On the evening of August 22, Eastern Time, Federal Reserve Chairman Powell's speech at the Jackson Hole annual meeting injected strong momentum into the recently pressured crypto market. He pointed out that the current balance of economic risks is changing, with rising downside risks in the job market, which the market interpreted as a potential beginning of a rate-cutting cycle by the Federal Reserve. Driven by this optimistic expectation, the crypto market experienced a widespread rally.
Bitcoin quickly rebounded, rising by 2.95% in one hour, surpassing $112,000 and briefly breaking through $117,000. Ethereum performed even stronger, surging from around $4,200 and reaching a historic high of $4,887.59 around 5 AM on August 23. The ETH/BTC exchange rate also rose, reaching 0.0418, the highest level since October 2024. The strength of mainstream coins also significantly boosted most altcoins.
In the futures market, data shows that the total liquidation amount across the network in the past 24 hours reached $694 million, with over $468 million in short liquidations, indicating a significant blow to bearish sentiment.
Powell turns dovish, expectations for rate cuts significantly rise
Before Powell's speech, the market was generally worried about a hawkish stance, and some investors exited early, leading to a pullback in the crypto market. However, Powell clearly stated that 'downside risks to employment are rising' and pointed out that 'a shift in risk balance may require policy response', which is widely seen as paving the way for a rate cut in September.
According to CME’s 'FedWatch', the probability of a rate cut in September surged to 91.2% after the speech. Nick Timiraos, a reporter known as the 'Fed Whisperer' (Wall Street Journal), reported that Powell has opened the door to a rate cut next month, mainly based on the rising likelihood of a slowdown in the job market, which could alleviate inflation pressures. However, he also emphasized that the Federal Reserve remains highly focused on inflation issues, tempering market expectations for consecutive aggressive rate cuts.
Deutsche Bank updates its forecast, expecting the Federal Reserve to cut rates by 25 basis points in September and December, significantly earlier than previous predictions. Kathy Bostjancic, Chief Economist at Nationwide, also noted that Powell's tone has clearly turned dovish, expecting a cumulative rate cut of 75 basis points by the end of the year to address the weakening labor market and temporary inflation pressures.
Analysis points out that Powell's speech marks a shift in policy focus toward employment support, and future interest rate paths will rely more on employment data. The next FOMC meeting will be held on September 18, and the market is preparing for a possible easing cycle.
Ethereum ETF and stablecoin data release positive signals
Despite recent outflows from Bitcoin spot ETFs, reflecting risk-averse sentiment in the market, Ethereum spot ETFs have turned from net outflow to a net inflow of $287.6 million since August 21, with a total net inflow currently at $12.09 billion, indicating that funds are repositioning in Ethereum and related assets.
The stablecoin market also shows a trend of capital inflow. The current total market capitalization of stablecoins has reached $277.74 billion, with an increase of $2.645 billion in the past week, a growth rate of 0.96%. Among them, USDT increased by 2.6% in the month, USDC by 4.63%, while USDe saw a more significant increase, growing by 80.87% within the month, reflecting a resurgence in market demand for crypto asset allocation.
In addition, the DeFi project WLFI supported by the Trump family plans to open token trading and claiming on September 1, which is expected to attract politically connected funds and US domestic users' attention, bringing new liquidity to the market.
Market analysis: Altcoin market is on the verge of explosion
Several market observers are optimistic about the prospects for altcoins. Former Goldman Sachs executive and Real Vision founder Raoul Pal pointed out through technical analysis that Total3 (the total market capitalization of altcoins excluding BTC and ETH) is about to reach an important turning point. Other analysts stated that if ETH can hold its historical high, it will significantly boost market confidence and drive the overall rise of the altcoin sector.
Additionally, some believe that Ethereum needs to effectively break through the key resistance of $5,000 to trigger a real 'altcoin frenzy', with the market peak expected to occur between September 13 and 20, more likely later. Before this, the overall market will still maintain an upward trend.
What do you all think? Leave your opinions in the comments.
