It’s been a rollercoaster week for crypto traders, and the latest move by the Federal Reserve is shaking things up! Fed Chairman Jerome Powell recently hinted at a possible rate cut in September, giving the stock market a massive boost. The Nasdaq 100 jumped 3.3%, and the S&P 500 went up by 2%. But for Bitcoin and Ethereum, it was a different story. Bitcoin slipped 1.3% to $66,088, and Ethereum dropped 1.11% to $3,313. The overall cryptocurrency market cap also fell by 0.71%, landing at $2.39 trillion.
Market experts are saying this drop in crypto prices is just a short-term dip. Even though we’re in a bear market, there are still some bullish signs for Bitcoin and other cryptos. Bitcoin has been struggling to break the $70,000 mark, but all eyes are on its performance in August as we inch closer to the potential rate cuts.
On July 31, the Fed wrapped up a two-day meeting, deciding to keep interest rates steady at 5.25% to 5.50%. This move was pretty much what everyone expected and marked the eighth meeting in a row without a rate change. According to market analysis firm Santiment, the Fed’s decision caused an initial dip in crypto prices because traders were hoping for a rate cut, which hasn’t happened since March 2020. If a rate cut does come, it could trigger a bullish trend for both stocks and cryptocurrencies, possibly lifting markets for the rest of 2024.
Even though we saw a selloff initially, the markets are expected to stabilize unless another major event rocks the crypto world. Despite the anticipation around the Fed meeting, the impact on cryptocurrencies was minimal since the rate pause was already priced in.
Looking back, Fed actions have always impacted all asset classes. Bitcoin and other altcoins soared in 2020 and 2021 when the Fed cut rates to zero, but started declining in 2022 when rates began to rise. Investors have since flocked to low-risk assets, with money market funds amassing over $6.1 trillion, benefiting from an average return of 5%.
Key indicators to watch for Bitcoin are its immediate resistance at $66,852 and support at $65,000. The Relative Strength Index (RSI) shows oversold conditions, hinting at potential further declines if Bitcoin falls below $65,900.
Investors are now keenly watching the Fed’s next moves, especially regarding inflation and economic growth, to gauge Bitcoin’s next steps. The interplay between Fed decisions and market reactions will be crucial in determining the future path of both cryptocurrencies and traditional assets.
So, how will this impact your investment strategy?
