Santiment Says Crypto Market Euphoria Over Fed Rate Cut May Signal Market Top

Crypto markets may be peaking as social media chatter around potential Federal Reserve rate cuts hits an 11-month high, Santiment said.

Keywords like “Fed,” “rate,” and “cut” have dominated discussions, reflecting unusually high investor optimism, said Santiment, which tracks crypto market sentiment.

“Historically, a massive spike in discussion around a single bullish narrative can indicate that euphoria is too high and may signal a market top,” it said in its “This Week in Crypto” report. “ETH is just inches away from its historic peak, but on-chain data shows its valuation is entering a “danger zone,” signaling potential for a pullback. Despite price stability, the amount of Bitcoin held on exchanges is rising, a trend that has historically preceded selling pressure.”

Powell Hints At Possible Rate Cuts

Santiment’s report comes after Fed Chair Jerome Powell said during a speech at Jackson Hole on Friday that the “shifting balance of risks may warrant policy adjustments,” boosting optimism over a rate cut next month. 

Traditional and crypto markets surged after Powell’s comments. 

Ethereum reached an all-time high (ATH) on crypto exchange Coinbase, while Bitcoin managed to recover back above the $115k mark again. 

The rally, according to Santiment, was the markets pricing in the potential stimulus in a clear “buy the rumor” scenario.

The crypto market has since undergone a slight pullback, with the sector’s market capitalization dropping a fraction of a percent in the last 24 hours to back below $4 trillion as of 1:38 a.m. EST.

crypto market overview

Crypto market overview (Source: CoinMarketCap)

During that period, Bitcoin slid below $115K to trade at $114,908, while Ethereum trades at $4,782.61 after a minor increase.

Bitcoin And Ethereum Showing Weak On-Chain Metrics, Says Santiment

Despite the market optimism, Santiment says Ethereum and Bitcoin are showing fairly weak on-chain metrics.

Bitcoin is showing ”worrying on-chain signs,” it said, with daily active addresses and transaction volumes having ”cooled off,”  

The long-term MVRV ratio, which measures holder profitability, sits at +18.5%, indicating a “slightly risky zone for new long-term investments,” Santiment said. 

An uptick in the amount of BTC on exchanges has surged by nearly 70,000 since June, it said, a shift that “can indicate that more holders are positioning themselves to sell.”

Ethereum’s MVRV also “signals a need for caution” even amid ETH’s exciting recent price jump, it said.

Ethereum’s short-term (30-day) MVRV is approaching +15%, a level identified as a “danger zone” that usually leads to pullbacks for altcoins. 

“Even more striking is the long-term MVRV at a very high +58.5%, increasing the risk of profit-taking,” Santiment said.

Related Articles:

  • Coinbase Predicts Stablecoin Market May Quadruple To $1.2 Trillion By 2028
  • Ethereum Surges 10%, Hits All-Time High On Coinbase
  • Ethereum NFTs Jump +20% In Daily Sales, As ETH Hits New ATH

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