Though the Federal Reserve Chair Jerome Powell didn’t make any commitment, he hinted at a possible cut in interest rates in September during his Jackson Hole address on Aug. 22.
Crypto traders on Polymarket, the crypto-based prediction market, think there is an 81% chance of the Fed cutting rates by 25 basis points.
In fact, the popular crypto analyst Quinten Francois predicted that the September rate cut will spark the “biggest bull run and altseason” in history.
Related: What is Crypto? Cryptocurrency explained
However, there is more than meets the eye.
The crypto intelligence platform Santiment published a report on Aug. 24, which shed light on some revealing factors underlying the market sentiment.
As per Santiment, mentions of the following keywords across social media platforms have surged to an 11-month high:
Historically, such a huge spike in online chatter around a single bullish trend can indicate that euphoria is getting “too high” and may also signal a local top. It means the market will hit a temporary high point before a correction takes place.
The report added:
“While optimism about a rate cut is fueling the market, social data suggests caution is warranted.”
Online conversation around Bitcoin has been geared toward its price going “higher,” Santiment highlighted but cautioned that this pattern has sometimes preceded price corrections. On the other hand, chatter around Ethereum has been rather “dormant,” which means it can still surge before getting overhyped.
Santiment analyst Brian even suggested that Ethereum has a good chance of hitting a new all-time high (ATH) of $5,000. Indeed, the cryptocurrency hit a new ATH of $4,935.52 on the day Santiment published the report.
However, the narrative around a potential Fed rate cut in September poses the biggest risk to the market, the report adds.
“If any news emerges to contradict the rate cut expectation, the market could see a swift correction.”
The Personal Consumption Expenditures (PCE) Price Index for July, expected on Aug. 29, is a key metric to watch out for, as it could prove pivotal in shaping the Fed’s decision in September.
