On Saturday, crypto sentiment shifted back to “Greed” as markets rallied following dovish remarks from US Federal Reserve Chair Jerome Powell, fueling speculation of a potential rate cut in September.
The Crypto Fear & Greed Index, which tracks overall market sentiment, climbed to 60 (“Greed”), up from Friday’s “Neutral” level of 50, after briefly slipping into “Fear” earlier in the week.
The rebound followed Powell’s address at the annual Jackson Hole economic symposium on Friday, where he noted that current inflation and labor market conditions “may warrant adjusting” the Fed’s monetary policy stance.
ETH is the “crypto asset most sensitive to interest rates”
Following Powell’s speech, Bitcoin jumped 5% to $117,300, triggering $379.88 million in short liquidations. Ether also rallied, reclaiming its 2021 all-time high of $4,878 and climbing as high as $4,851 — an 11.51% gain in 24 hours, per CoinMarketCap.
In an X post that same day, Axie Infinity co-founder Jeffrey “Jiho” Zirlin described Ether as the “most rate-sensitive aspect of crypto,” noting that “as interest rates drop, the spread between yields from depositing stablecoins in DeFi versus depositing USD in a bank widens.”
The CME FedWatch Tool shows 75% of market participants now expect a rate cut at the Fed’s Sept. 17 meeting. Trading resource The Kobeissi Letter echoed this sentiment, writing, “It appears Fed Chair Powell is setting the stage for a September rate cut.”
Historically, Fed rate cuts have boosted liquidity, making risk assets like crypto more appealing.
The surge was largely anticipated by crypto market participants
However, St. Louis Fed President Alberto Musalem told Reuters on Friday that he still needs more time before deciding whether to back an interest rate cut.
“I will be updating my outlook and balance of risks right up until two or three days before the meeting,” he said.
Earlier in the week, several crypto traders had predicted a market rally if Powell signaled a rate cut. Author Jason Williams wrote on Wednesday that if Powell “comes in soft and leans that rate cuts are likely, we turbo rip.”
Similarly, Crypto Banter’s Ran Neuner said, “Jackson Hole will shape crypto’s direction moving forward,” adding, “Trump is pushing for a rate cut with good reason, but will Powell listen?”
