The year-end target for Bitcoin is between $125,000 and $150,000, while ETH is between $6,000 and $7,000, with early signs of an altcoin season emerging, and the bull market expected to reach its strongest state in the fourth quarter.
Written by: Ben Strack
Compiled by: AididiaoJP, Foresight News
After Fed Chairman Jerome Powell's dovish comments, it seems like a good time to implement a rotation strategy, especially as macro factors increasingly influence the cryptocurrency market over time.
We still do not know what the Fed will do at the meeting on September 17. But for many, Powell's comments have a dovish tone, opening up the possibility for a rate cut next month.
If we look at the CME Group's FedWatch tool, based on the 30-day federal funds futures prices, as of Monday noon, many believe that a 25 basis point rate cut is likely, a view that is much higher than a month ago.
While rate cuts are typically favorable for risk assets like Bitcoin, the reality is more nuanced. Bitcoin soared above $117,000 on Friday, then fell back below $111,000. The asset was trading around $112,600 at 1:30 PM ET and has since dropped below $110,000.
YouHodler market director Ruslan Lienkha believes that the broader trajectory of the cryptocurrency market will still depend on the macro backdrop.
'If inflationary pressures persist, the Fed may be forced to extend the pause again, limiting the lasting impact of a single rate cut,' he told me. 'Moreover, if rate cuts are seen as an emergency response to a recession, it could weigh on cryptocurrencies and other risk assets.'
Best case scenario? Rate cuts are part of the Fed's successful efforts to achieve a soft landing.
'In this environment, given Bitcoin's status as the most mature digital asset, it may attract the majority of institutional inflows,' Lienkha said. 'Some altcoins may perform better because they have higher volatility and lower liquidity, which can amplify the multiples of altcoins when funds flow beyond Bitcoin.'
When it comes to institutional fund flows, according to CoinShares data, cryptocurrency investment products saw outflows of over $1.4 billion last week, the highest single-week outflow since March. In these data, we see that early pessimism about the Fed's stance seemed to drive the outflows, followed by a recovery after Powell's comments (mainly in Ethereum products).
Despite a total inflow of $625 million into U.S. ETH ETFs on Thursday and Friday, BTC funds saw an outflow of $217 million over those two days. So far this month, the net inflow for ETH and BTC ETFs has been +$2.5 billion and -$1 billion, 'marking a significant change in investor sentiment towards these two assets,' noted CoinShares' James Butterfill.
What signals did investors receive from Friday?
CK Zheng, co-founder of cryptocurrency hedge fund ZX Squared Capital, stated that Powell's shift towards potential rate cuts is 'significant' for risk asset classes.
His year-end target for Bitcoin is between $125,000 and $150,000. He expects ETH to end the year between $6,000 and $7,000. (It hovered around $4,600 on Monday afternoon).
Matt Lason, Chief Investment Officer of Globe 3 Capital, stated that any signals of interest rate cuts confirm the hedge fund's bullish positions, as more liquidity is crucial for cryptocurrencies. He expects the strength of the current cryptocurrency bull market to reach its peak in the fourth quarter.
The anticipated interest rate cuts have prompted Globe 3 Capital to shift more of its holdings towards small-cap tokens, 'because we see early signs of the long-awaited altcoin season,' Lason added.
What should we expect after the fourth quarter? 50T Funds founder Dan Tapiero shared his thoughts over the weekend on X, citing Morgan Stanley's research.
Zheng stated that he expects Bitcoin's dominance to continue to decline after the signing of the (GENIUS Act), estimating that the stablecoin market will grow 10 times in the coming years (from about $270 billion). Coinbase's latest simulation suggests that the stablecoin market cap could reach $1.2 trillion by the end of 2028.
We know that the cryptocurrency market changes rapidly, but I think this 'thinking about our current situation' is worthwhile. Even if everything changes in weeks, days, or hours.
