Bitcoin News Today: Fed Rate Cuts Could Spark Crypto Rally, Santiment Warns of Risks

The U.S. Federal Reserve’s approach to interest rates continues to shape expectations across both traditional and digital financial markets. Santiment, a leading on-chain analytics firm, has raised concerns that a prolonged tightening cycle could weaken momentum in the cryptocurrency sector, particularly for assets like Bitcoin and Ethereum [1]. This comes as the Fed signals potential policy shifts, with Chair Jerome Powell hinting at rate cuts during his remarks at the Jackson Hole symposium. However, Santiment warns that higher borrowing costs, if sustained, could reduce liquidity for speculative assets, which are more sensitive to capital flows [1].

Following Powell’s speech, Ethereum edged closer to its all-time high, trading at $4,834, while Bitcoin consolidated near $117,000. Chainlink also reached $27.11, its highest level since late 2024 [1]. Despite these gains, Santiment noted that Bitcoin exchange balances have risen by nearly 70,000 BTC since June—a trend historically linked to future selling pressure. On-chain metrics also showed Ethereum’s short-term MVRV ratio entering a “danger zone” near +15 percent, a level often associated with pullbacks. Meanwhile, the long-term MVRV of +58.5 percent signals potential profit-taking by long-term holders [1].

Social data further reflects the market's sensitivity to Fed policy. Discussions around “Fed,” “rate,” and “cut” hit an 11-month high after Powell’s speech, with Santiment noting that such a concentration of bullish narratives on social media can precede short-term tops. Sentiment readings also dipped to their lowest level since July before the recent rally, which analysts often associate with rebound potential [1].

The correlation between traditional markets and crypto has also sharpened. The S&P 500 reached a new record high, echoing Bitcoin’s and gold’s movements in response to Fed messaging. This alignment suggests that digital assets are increasingly being viewed as risk-on instruments, reacting in tandem with broader financial markets [1].

Coinbase Institutional joined the conversation on X, asking whether Fed rate cuts could trigger a crypto market breakout. The firm suggested that lower rates might push liquidity into digital assets as money market funds become less attractive [1]. However, Santiment emphasized that prolonged high rates or a restrictive policy stance could have the opposite effect, reducing demand for crypto and exacerbating volatility.

Market participants remain split on the outlook. While a dovish pivot is seen as favorable for Bitcoin, institutional outflows from Bitcoin ETFs—amounting to $1.17 billion—highlight the fragility of current conditions [3]. Bonds have also surged as yields climb, drawing capital away from equities and crypto. At the same time, concerns over inflationary pressures and potential tariff hikes continue to weigh on stocks, reinforcing the view that higher borrowing costs are detrimental to risk assets [1].

Despite the uncertainty, some analysts remain optimistic that Bitcoin could test $120,000 if the Fed proceeds with rate cuts, with technical indicators like the MACD and Fibonacci levels suggesting a period of consolidation before a potential breakout [2]. On-chain activity also supports a bullish narrative, with long-term holders accumulating at elevated levels and selling pressure easing [2].

Nonetheless, it is crucial to differentiate between analysis and speculation. While some projections suggest Bitcoin could reach $145,000 by 2025, these are based on assumptions about continued Fed easing and broader market adoption. Investors are advised to remain cautious and account for the risks posed by a volatile macroeconomic environment [2].

In summary, the Fed’s rising interest rates remain a key variable for the crypto market. While a dovish turn could provide a tailwind, the current data reflects mixed signals. Investors must remain adaptable, balancing potential upside with the realities of regulatory and macroeconomic shifts [1][2][3].

---

Sources:

[1] Title: The Fed’s Rising Interest Rates May Be Bad For Crypto, Santiment Says

URL: https://www.livebitcoinnews.com/the-feds-rising-interest-rates-may-be-bad-for-crypto-santiment-says/

[2] Title: Bitcoin's $120K Potential in a Dovish Fed Regime

URL: https://www.ainvest.com/news/bitcoin-120k-potential-dovish-fed-regime-2508/

[3] Title: Bitcoin (BTC) Price Today: Bitcoin Struggles as Whale Selling Overshadows Fed Rate-Cut Optimism

URL: https://www.mexc.co/en-IN/news/bitcoin-btc-price-today-bitcoin-struggles-as-whale-selling-overshadows-fed-rate-cut-optimism/73657