Crypto Market Recovers as Fed Rate Cut Speculation Rises
The crypto market has shown notable recovery, with Bitcoin (BTC) briefly exceeding $56,000 and settling around $55,713, reflecting a 3% rise in 24 hours. This rebound, alongside strong gains in Ethereum (ETH) and other major cryptocurrencies, is largely attributed to rising speculation about a potential Federal Reserve rate cut.
On Tuesday morning, Bitcoin (BTC) briefly surpassed $56,000 before settling at $55,713, reflecting a 3% rise over 24 hours. Ethereum (ETH) and other major cryptocurrencies have also rebounded strongly. Analysts suggest that anticipation of a Federal Reserve rate cut may be driving the market's upward momentum.
Fed Rate Cut Speculation
Recent statements from Federal Reserve Chair Jerome Powell minimized the likelihood of rate cuts this year, with only an 11% chance of a 50 basis point cut before September's meeting. However, Monday’s market sell-offs have intensified speculation about a potential emergency rate cut.
Chart by TradingView
CME data now shows a 75.5% probability of a 50 basis point cut on September 18. Financial analyst Robert Prechter has criticized the Fed’s decision to not lower rates last week, suggesting they may act before the September meeting. Emergency rate cuts are uncommon and typically signal severe economic distress.
The crypto market experienced $1.06 billion in liquidations over the past 24 hours, with $901.33 million from long positions and $159.41 million from short positions. This spike, up from around $800 million earlier, was driven by weak U.S. economic data, unwinding of the yen carry trade, and geopolitical tensions. Jump Trading’s significant Ethereum sell-off added further pressure.
Looking Ahead: Despite the volatility, Bitwise CIO Matt Hougan sees recent market fluctuations as a potential buying opportunity. He draws parallels with past market dips, such as March 12, 2020, which later proved to be a favorable time to buy Bitcoin. Hougan advises maintaining a long-term perspective, watching liquidation trends, and monitoring ETF flows to gauge market sentiment and stability.
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