Bitcoin: The Fear & Greed Index Climbs 10 Points in 24h

While Jerome Powell surprises everyone at Jackson Hole with a more accommodative tone, bitcoin and Ether reach symbolic highs again. Investors, fueled by the prospect of a rate cut as early as September, rush back to risky assets. But can this euphoria last?

Bullish sentiment explosion, Bitcoin and Ether in full euphoria

The Chairman of the United States Federal Reserve, Jerome Powell, triggered a real earthquake on crypto markets Friday.

At the annual Jackson Hole economic symposium, he hinted that current conditions might justify a monetary policy adjustment. A brief sentence that was enough to transform investor sentiment.

The Crypto Fear & Greed Index, an essential market sentiment barometer, jumped by 10 points in just twenty-four hours. Moving from 50 (“neutral” zone) to 60 (“greed” zone), it marks a spectacular turnaround, all the more remarkable as it had flipped to “fear” earlier in the week.

Cryptos reacted immediately to these dovish signals. Bitcoin rose 5%, crossing $117,300, while triggering the brutal liquidation of nearly $380 million in short positions. Investors betting on a pullback were caught off guard.

But it is Ethereum that showed the greatest sensitivity to Powell’s announcement. The asset nearly reached its historical 2021 record at $4,878, hitting an intraday peak of $4,887, a surge of more than 12% in 24 hours. A striking demonstration of its responsiveness to rate dynamics.

“Ethereum is the most rate-sensitive aspect of crypto“, reminds Jeffrey “Jiho” Zirlin, co-founder of Axie Infinity. 

Lower rates mean more stablecoins flowing into Ethereum.

Markets are betting on September

Traders did not hesitate to react. According to the CME FedWatch tool, nearly 75% of market participants now anticipate a rate cut at the Fed meeting scheduled for September 17. This high probability illustrates a widely shared conviction: the time for monetary easing is approaching.

“It seems Federal Reserve Chairman Powell is preparing the ground for a rate cut in September.“, observes The Kobeissi Letter, an influential financial publication on Wall Street. 

Historically, every monetary easing cycle has increased liquidity and strengthened the appeal of risky assets. Cryptos, in particular, rank high among these beneficiaries.

However, consensus is not yet unanimous within the Federal Reserve. Alberto Musalem, President of the St. Louis Fed, somewhat cooled enthusiasm on Friday. 

In an interview with Reuters, he said he still needs more time to decide whether he would support a rate cut, specifying he would update his position up to two or three days before the meeting.

In the crypto community, several observers had already anticipated a price surge. Some believed that a more conciliatory Powell speech would open the way for a rapid and marked market increase. Others emphasized the strategic importance of Jackson Hole, seen as a decisive moment for the future direction of cryptos.

In short, caution remains advisable. The return to greed on the Fear & Greed Index can also signal excessive optimism. Crypto markets remain unpredictable and sensitive to central bankers’ statements. Less accommodative communication could quickly cool the current euphoria.