Trump's predecessor, Powell, bucks trends as crypto assets plummet, hinting at potential market volatility.
The current outlook for monetary policy indicates that the Federal Reserve, led by Jerome Powell, is unlikely to cut interest rates in the near term despite ongoing pressure from former President Donald Trump. Powell emphasized a "long way to go" before the Fed might consider lowering rates, signaling a cautious approach in assessing the economic impact of tariffs and inflation.
This stance contrasts with Trump's repeated demands for lower borrowing costs, creating tension between the Fed's independence and political pressures. The Fed maintained its key rate at around 4.3%, holding steady for the fifth time this year. There were rare dissenting votes within the Fed's board favoring rate cuts, but the majority, including Powell, preferred to "stand pat."
The impact of this monetary policy on the crypto market, particularly altcoins, is significant. The Fed holding interest rates steady or higher tends to strengthen the US dollar and increase the opportunity cost of holding non-yielding assets like cryptocurrencies, which can put downward pressure on crypto prices. Uncertainty and cautious monetary policy may dampen investor risk appetite, potentially limiting speculative inflows into altcoins compared to more established cryptocurrencies like Bitcoin.
However, sustained inflation worries (exacerbated by tariffs) may encourage some investors to seek alternatives like cryptocurrencies as a hedge against fiat currency risks. The ongoing tension and uncertainty around Fed policy decisions could also increase volatility in altcoin markets, as traders react to mixed economic signals.
In the crypto market, Bitcoin is maintaining its positions around recent levels, demonstrating resilience in the face of monetary uncertainty. Meanwhile, altcoins have collectively lost $50 billion in market capitalization over 48 hours, indicating a healthy correction rather than generating panic selling. This correction could be the last hiccup before a new expansion phase, as the decreasing dominance of Bitcoin and the collective weakness of altcoins create ideal conditions for a revival of the altcoin market.
The current probability on Polymarket for a rate cut in September stands at 44%. Prediction markets suggest that 2025 is shaping up to be the year of monetary easing, with the probability of a rate cut in that year jumping to 76%. This wait-and-see approach on monetary policy is partly due to trade measures' impact, as the Fed seeks to maintain financial stability amid ongoing economic uncertainty.
In the meantime, the crypto market is currently going through a consolidation phase, offering opportunities for long-term investors to gradually strengthen positions in fundamentally solid projects using DCA (Dollar Cost Averaging). Examples of potentially explosive DeFi (decentralized finance) projects include Ethana and Zebec Network. Institutional accumulation is also on the rise, indicating a growing interest in cryptocurrencies as a viable asset class.
September is a crucial month for crypto markets, potentially marking a turning point. As the Fed continues to navigate the complexities of monetary policy, the crypto market will continue to demonstrate its resilience and adaptability in the face of uncertainty. For the medium term, prospects remain favorable for cryptocurrencies, with Bitcoin playing a role as a relative safe-haven asset and quality altcoins offering attractive accumulation opportunities.
- At the crypto academy, discussions about the impact of the Federal Reserve's monetary policy on the cryptocurrency market are of significant interest, as the holding of interest rates steady or higher tends to strengthen the US dollar and potentially put downward pressure on crypto prices, while sustained inflation worries may encourage some investors to seek cryptocurrencies as a hedge against fiat currency risks.
- The ongoing tension and uncertainty around Fed policy decisions, as well as the future likelihood of rate cuts in September (44%) or 2025 (76%), are crucial general-news factors that can impact both the finance sector and the cryptocurrency market, with September being a crucial month that could mark a turning point for the crypto markets, particularly altcoins.
