Bitcoin (BTC) and Altcoins Stage Strong Comeback as Jerome Powell Hints at Rate Cuts in September

Bitcoin (BTC) jumped to $64,000 on Aug. 24 while Ethereum (ETH) pushed to $2,765. The total market cap of all coins rose by almost 5% to over $2.26.

Bitcoin and altcoins recovered sharply on Aug. 24 after Federal Reserve Chairman Jerome Powell hinted that interest rates will start falling in September.

Bitcoin (BTC) rose to $64,000 on Aug. 24, while Ethereum (ETH) pushed to $2,765. The total market capitalization of all coins increased by nearly 5% to over $2.26 trillion.

The same trend occurred in the stock market, with key indices like the Dow Jones, S&P 500, and Nasdaq 100 approaching their all-time highs. However, there is a possibility that the gains in the stock and crypto markets will be short-lived.

Buy the rumor, sell the newsThe market had already priced in a September rate cut following the recent weaker-than-expected U.S. jobs numbers. The probability in the Fed Rate Monitor tool has been above 80% for the last three weeks.

Powell’s statement was merely a hint at what to expect at the next meeting, which is scheduled for Sept. 18. Therefore, with a rate cut fully priced in, there is a risk that stocks and crypto will decline as investors "sell the news."

This trend has occurred several times before. For instance, Bitcoin dropped by nearly 10% after halving, while Ether has fallen by double digits since the Securities and Exchange Commission approved ETFs.

According to Geiger Capital, a conservative-leaning commentator on X.com, stocks tend to drop sharply after the Fed begins cutting rates, citing 2001 and 2002 as examples.

?First Rate Cut – Jan 3, 2001– S&P 500 fell ~39% next 448 days– Unemployment rose another 2.1%?First Rate Cut – Sep 18, 2007– S&P 500 fell ~54% next 372 days– Unemployment rose another 5.3%?First Rate Cut – Sep 18, 2024– ?– ?

On the brighter side, stocks have performed well when the Fed begins cutting rates, as witnessed in 2020 during the early stages of the Covid-19 pandemic.

Another positive is that these cuts are occurring at a time when American companies are reporting strong earnings growth.

Money markets are seeing inflowsAnother reason why cryptocurrencies could decline after the Fed begins cutting is that low-risk money market funds are still seeing inflows.

Data showed that these funds had over $90 billion in net inflows in the first half of August despite rising expectations of rate cuts. These funds now hold over $6.2 trillion in assets.

The theory has been that risky assets like crypto and stocks will see more inflows as money market investors begin to capitulate.

This rotation will likely occur, but it will take time since interest rate cuts will probably be gradual.

Bitcoin is still forming lower highsBitcoin rebounded to $64,000 after falling to $49,000 earlier this month. But this price action is still not a complete breakout because the coin has remained within this range over the past few months.

Interestingly, 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. Therefore, 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.

On the positive side, the series of lower highs and lower lows has formed a falling broadening wedge pattern, which is a common bullish indicator.

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