Crypto Markets Recalibrate: Post-Jackson Hole Analysis Reveals Key Shifts
Crypto's resilience tested as Powell's shadow looms over digital assets.
Market Pulse: Volatility Spikes After Symposium
Traders digest Fed signals while altcoins defy traditional finance expectations. Bitcoin holds key support levels as institutional flows show cautious optimism.
DeFi Outperformance: The Real Story
Decentralized protocols outperform legacy systems during uncertainty. Yield strategies adapt faster than traditional banks can hold committee meetings.
Regulatory Winds Shift
Global watchdogs scramble while innovation charges ahead. The usual finance giants suddenly remember they 'always believed in blockchain'—just in time for the next rally.
Bottom line: Digital assets keep evolving while traditional finance keeps presenting PowerPoints.
While an interest rate cut is generally good for risk assets like bitcoin, it’s a bit more nuanced than that. BTC surged above $117,000 on Friday before reversing course to below $111,000. The asset was trading for around $112,600 at 1:30 pm ET.
The broader trajectory of where crypto markets are headed will still depend on the macro backdrop, argued YouHodler markets chief Ruslan Lienkha.
“If inflationary pressures persist, the Fed may be forced into another prolonged pause, limiting the sustained impact of a single cut,” he told me. “Moreover, if a rate reduction is perceived as an emergency response to a recession, it could weigh on crypto alongside other risk assets.”
The best scenario? A cut that is part of a successful Fed effort to engineer a soft landing.
“In that environment, Bitcoin is likely to capture the bulk of institutional inflows, given its position as the most established digital asset,” Lienkha said. “Select altcoins could outperform in percentage terms due to their higher volatility and lower liquidity, amplifying upside moves when capital flows broaden beyond bitcoin.”
Speaking of institutional flows, crypto investment products saw more than $1.4 billion leave their coffers last week, according to CoinShares — the highest weekly outflow total since March. Within that data, we saw early-week pessimism around the Fed’s stance appearing to drive the outflows, before a recovery later on (mostly with ether products) around Powell’s remarks.
While $625 million flowed into US ETH ETFs on Thursday and Friday combined, $217 million exited BTC funds on those two days. Month-to-date net inflows for ETH and BTC ETFs are at +$2.5 billion and -$1 billion, respectively, “marking a notable change in investor sentiment toward the two assets,” noted CoinShares’ James Butterfill.
What did asset allocators take away from Friday?
CK Zheng, co-founder of crypto hedge fund ZX Squared Capital, called Powell’s pivot to possibly start cutting rates “significant” for risky asset classes.
His year-end target for bitcoin is between $125,000 and $150,000. He expects ETH to finish the year between $6,000 and $7,000. (It hovered around $4,600 Monday afternoon).
Globe 3 Capital CIO Matt Lason said that any rate cut signal confirms the hedge fund’s bullish positioning given how important more liquidity is in crypto. He expects the intensity of the ongoing crypto bull market to be strongest in Q4.
The expected rate cuts spurred Globe 3 Capital to rotate more of its holdings into smaller cap tokens “as we are seeing early signs of the long-awaited alt coin season,” Lason added.
What should we expect beyond Q4? 50T Funds founder Dan Tapiero weighed in this weekend on X, citing Morgan Stanley research:
Loading Tweet..Zheng said he foresees bitcoin dominance continuing to drop after the GENIUS Act signing, estimating the stablecoin market to 10x (from ~$270 billion) in the next few years. Coinbase’s latest simulations suggest the stablecoin market cap could reach $1.2 trillion by the end of 2028.
We know crypto markets MOVE fast, but I think these “where-we-stand” snapshots are worth it. Even if it all changes in a few weeks, days or hours.
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