All declines are paper tigers; the wild altcoin season brought by rate cuts will be in the fourth quarter?

Federal Reserve Chairman Jerome Powell's dovish remarks suggest the possibility of interest rate cuts, and macro factors will continue to influence the cryptocurrency market, with expectations of a wild altcoin season in the fourth quarter. This article is sourced from a piece by Ben Strack, compiled and translated by Foresight News. (Background: If the foundation of altcoin season is Bitcoin's fluctuations, it might really be coming) (Supplementary Background: Is altcoin season really here? Google searches for 'Altcoin' have surged to a seven-year high, with the main sources coming from African countries) After Federal Reserve Chairman Jerome Powell's dovish remarks, it seems like a good time to implement a portfolio rebalancing strategy, especially as macro factors increasingly influence the cryptocurrency market over time. We still do not know what the Fed will decide in the meeting on September 17. But for many, Powell's comments carry a dovish tendency, opening up the possibility for interest rate cuts next month. If we look at CME Group's FedWatch tool, based on the prices of 30-day federal funds futures, many believe a 25 basis point cut is likely, a sentiment that is much higher than a month ago: While rate cuts are generally favorable for risk assets like Bitcoin, the reality is more nuanced. Bitcoin surged above $117,000 on Friday, then fell back below $111,000. The asset was trading at around $112,600 at 1:30 PM ET and has since dropped below $110,000. YouHodler's market head Ruslan Lienkha believes the broader direction 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 the rate cut is seen as an emergency response to a recession, it may drag down cryptocurrencies and other risk assets." Best-case scenario? The rate cut is 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 most institutional capital inflows," Lienkha said. "Some altcoins may perform better as they have higher volatility and lower liquidity, which can amplify the upside of altcoins when funds flow beyond Bitcoin." Speaking of institutional capital flows, according to CoinShares data, over $1.4 billion flowed out of cryptocurrency investment products last week, the highest total outflow in a single week since March. In this data, we see that the pessimistic sentiment towards the Fed's stance at the beginning of the week seemed to drive the outflows, followed by a recovery after Powell's comments (mainly in Ethereum products). Despite the 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, net inflows for ETH and BTC ETFs are +$2.5 billion and -$1 billion, respectively, "marking a significant shift in investor sentiment towards these two assets," pointed out CoinShares' James Butterfill. What signals did investors get from Friday? CK Zheng, co-founder of cryptocurrency hedge fund ZX Squared Capital, stated that Powell's pivot towards possible 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 be between $6,000 and $7,000 by the end of the year (hovering around $4,600 on Monday afternoon). Matt Lason, Chief Investment Officer at Globe 3 Capital, said that any signal of rate cuts confirms the hedge fund's bullish position, as more liquidity is crucial for cryptocurrencies. He anticipates that the strength of the current cryptocurrency bull market will peak in the fourth quarter. The anticipated rate cuts prompt Globe 3 Capital to shift more of its positions towards small-cap tokens, "because we are seeing early signs of the long-awaited altcoin season," Lason added. What should we expect after the fourth quarter? Dan Tapiero, founder of 50T Funds, shared his views over the weekend on X, citing research from Morgan Stanley: Zheng indicated that he expects Bitcoin's dominance to continue to decline after the signing of the (GENIUS Act), estimating that the stablecoin market will grow tenfold in the coming years (from about $270 billion). Coinbase's latest simulation suggests that the market cap of stablecoins could reach $1.2 trillion by the end of 2028. We know that the cryptocurrency market changes rapidly, but I believe these thoughts on "our current situation" are worth considering, even if everything changes in a few weeks, days, or hours. Related reports: Bitcoin's market share falls below 60%, hitting a six-month low. Is a new round of 'altcoin season' coming? On-chain data: Bitcoin whales start to accumulate BTC again. Has the altcoin season not yet come or is it already over? Arthur Hayes: The altcoin season is right around the corner! Focus on the ambition of HYPE, which surged 50% this month. "All declines are paper tigers; the wild altcoin season brought by rate cuts will be in the fourth quarter?" This article was first published by BlockTempo (BlockTempo - the most influential blockchain news media).