Bitcoin and altcoins staged a strong comeback after Jerome Powell, the Federal Reserve chairman, hinted that interest rates would start falling in September.<\/p>\n
Bitcoin (BTC<\/a>) jumped to $64,000 on Aug. 24 while Ethereum (ETH<\/a>) pushed to $2,765. The total market cap of all coins rose by almost 5% to over $2.26.\u00a0<\/p>\n The same trend happened in the stock market, where key indices like the Dow Jones, S&P 500, and the Nasdaq 100 approached their all-time highs. Still, there is a risk that gains in the stock and crypto market will be short-lived.<\/p>\n The market was already factoring in rate cuts for September after the recent weaker-than-expected<\/a> U.S. jobs numbers. The probability in the Fed Rate Monitor<\/a> <\/strong>tool has been above 80% in the past three weeks.<\/p>\n Therefore, Powell\u2019s statement<\/a> was just a clue as to what to expect at the next meeting, scheduled for Sept. 18. As such, with a rate cut fully priced in, there is a risk that stocks and crypto will retreat as investors sell the news.\u00a0<\/p>\n This trend has happened several times. For example, Bitcoin dropped by almost 10% after halving, while Ether has fallen by double digits since the Securities and Exchange Commission approved ETFs.<\/p>\n Stocks typically drop sharply after the Fed starts cutting rates. Geiger Capital, a conservative-leaning commentator on X.com, recalled 2001 and 2002 as examples. <\/p>\n \ud83d\udd38First Rate Cut \u2013 Jan 3, 2001 \ud83d\udd38First Rate Cut \u2013 Sep 18, 2007 \ud83d\udd38First Rate Cut \u2013 Sep 18, 2024 \u2014 Geiger Capital (@Geiger_Capital) August 23, 2024<\/a><\/p><\/blockquote>\n<\/div>\n<\/figure>\n On the positive side, stocks have done well when the Fed starts cuts, as we saw in 2020 during the early stages of the Covid-19 pandemic. <\/p>\n Another positive is that these cuts are coming at a time when American companies are reporting strong earnings growth<\/a>.<\/p>\n Another reason why cryptocurrencies may retreat after the Fed starts cutting is that low-risk money market funds are still seeing inflows.\u00a0<\/p>\n Data shows that these funds had over $90 billion<\/a> in net inflows in the first half of August even as expectations of rate cuts rose. These funds now hold over $6.2 trillion in assets.<\/p>\n The theory has been that risky assets like crypto and stocks will see more inflows as money market investors capitulate.\u00a0<\/p>\n This rotation will likely happen, but it will take time since interest rate cuts will likely be gradual.<\/p>\n Bitcoin rebounded to $64,000 after falling to $49,000 earlier this month. However, this price action is still not yet a complete breakout because it has remained in this range in the past few months.<\/p>\n Notably, Bitcoin has been forming a series of lower highs since March. The first high was at $73,800 followed by $72,000 and $70,000. As such, a complete bullish breakout will be confirmed if the coin clears the first high at $73,800. Before that happens, there is a risk that Bitcoin will resume the bearish trend.<\/p>\n On the positive side, the series of lower highs and lower lows has resulted in a falling broadening wedge pattern, a popular bullish sign.<\/p>\n<\/div>\nBuy the rumor, sell the news<\/h2>\n
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\u2013 S&P 500 fell ~39% next 448 days
\u2013 Unemployment rose another 2.1%<\/p>\n
\u2013 S&P 500 fell ~54% next 372 days
\u2013 Unemployment rose another 5.3%<\/p>\n
\u2013 ?
\u2013 ? pic.twitter.com\/ByaP9mtGq4<\/a><\/p>\nMoney markets are seeing inflows<\/h2>\n
Bitcoin is still forming lower highs<\/h2>\n
![\"Bitcoin,](\"https:\/\/crypto.news\/app\/uploads\/2024\/08\/Bitcoin-Price-10-1024x568.png.webp\"\/)
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