The sentiment platform Santiment indicates that the surge in social media discussions surrounding the highly anticipated Federal Reserve's September interest rate decision could be a warning signal for cryptocurrencies.
Previously, the cryptocurrency market rose on Friday after Federal Reserve Chairman Jerome Powell made dovish remarks at the annual Jackson Hole Economic Symposium, shifting market sentiment back to a state of greed. He hinted that the first rate cut in 2025 could come as early as September.
"Historically, such a massive surge in discussions around a single bullish narrative may indicate that the market is overly optimistic and could signal a local top," Santiment stated in a report on Saturday. The company noted that discussions on social media mentioning keywords related to the Federal Reserve and rate cuts have surged to the highest level in 11 months.
"While optimism about rate cuts is driving the market, social data suggests a need for caution," Santiment added.
In his speech on Friday, Powell stated that the current state of inflation and the labor market "may require adjustments" to the Federal Reserve's monetary policy stance. According to the CME FedWatch tool, 75% of market participants expect a rate cut at the September meeting.
Many cryptocurrency analysts have based their predictions for the cryptocurrency market on the Federal Reserve's decisions this year. While some view rate cuts as a potential bullish catalyst, others have differing opinions on the outcome.
After Powell's speech, cryptocurrency trader Ash Crypto stated, "The Federal Reserve will start the money printing machine in the fourth quarter of this year," while implementing two rate cuts, which means "trillions of dollars will flow into the cryptocurrency market."
"We are about to enter a parabolic phase, where altcoins will explode 10x-50x," Ash Crypto said.
Others believe that the cryptocurrency market may not immediately see the effects of the Federal Reserve's rate cuts.
On April 11, Markus Thielen, head of research at 10x Research, stated, "It is still too early to expect a bullish impulse." He mentioned that while Bitcoin (BTC) may present long-term price opportunities, it could face short-term pressure driven by recession concerns.
Meanwhile, some have indicated that if the Federal Reserve does not take action this year, it could pose a headwind for the cryptocurrency market.
On March 9, network economist Timothy Peterson warned that if the Federal Reserve delays rate cuts until 2025, it could lead to a broader decline in the cryptocurrency market.
Related: Federal Reserve remarks drive Bitcoin (BTC) and Ethereum (ETH) soaring, cryptocurrency sentiment returns to greed
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