Cryptocurrencies, led by Bitcoin, could be gearing up for a strong recovery as central banks, especially the US Federal Reserve (Fed), are expected to ease monetary policy, according to market analysts.
The rate cut is expected to bring new liquidation to financial markets, boosting risk assets like stocks and crypto, despite the current uncertainty.
However, analysts warn that investors should be cautious, especially with the US presidential election in November and uncertainties related to fiscal policy. Despite the generally cautious optimism about the outlook for the cryptocurrency market as global central banks move to ease, analysts emphasize that caution is still needed.
This gives hope to market observers, especially after they saw a decline in top cryptocurrencies late Tuesday, with liquidations of positions betting on high prices surpassing $170 million.
Bitcoin has fallen about 6% from its peak on Tuesday to $59,143, according to data from TradingView.
QCP Capital emphasized on Tuesday that any decline in stocks and cryptocurrencies will likely be “temporary,” as the Fed gets ready to begin its rate-cutting cycle.
Last week, US Federal Reserve Chairman Jerome Powell suggested the central bank could start cutting interest rates as early as next month, with markets predicting three cuts this year.
“The increased liquidation will push risk assets higher,” the Singapore-based digital asset trading firm wrote in a note to investors. “We are finally entering a rate-cutting cycle.”
This view is Chia by analysts at blockchain analytics platform Nansen , as they highlight the potential for a prolonged bullish trend in the cryptocurrency market, fueled by what they call the “Fed put.”
The term refers to the belief that the Federal Reserve will intervene to support the economy and financial markets, especially when inflation is low and growth is stable.
“The crypto bull mode is not yet threatened,” Nansen stated in a Tuesday report, emphasizing that “the strongest bullish driver is the ‘Fed put’ amid weak growth but no recession.”
Despite the somewhat optimistic outlook, Nansen warns that high stock valuations could be a risk for the crypto market, creating what they call a “bearish asymmetry” for risk assets.
In other words, while the cryptocurrency market has a positive outlook, there are concerns that stocks are overvalued. If the stock price falls, it could have a negative impact on the cryptocurrency market rather than the benefit that the market could receive from the rising stock price.
The report also suggests that current economic conditions favor a cautious approach, recommending that investors “reduce their exposure to cryptocurrencies during bull runs and focus on major coins” like Bitcoin and Ethereum.
You can XEM coin prices here.
Disclaimer: This article is for informational purposes only and is not investment advice. Investors should research carefully before making any decision. We are not responsible for your investment decisions.
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Wang Jian
According to Decrypt
