4 Minutes
Fed rate-cut hopes lift crypto sentiment
Market expectations for a September Federal Reserve rate cut have rebounded sharply after Chair Jerome Powell's remarks at Jackson Hole. Major banks including Morgan Stanley, Barclays, BNP Paribas and Deutsche Bank revised their forecasts toward earlier easing, citing signs of cooling in the labor market and softer inflation prints. That optimism has helped lift risk assets and has traders and investors pricing in a possible Q4 crypto rally through CFTC-regulated infrastructure.
Why markets flipped
Powell acknowledged a weakening labor market, pointing to July's surprisingly low payroll gain of about 73,000 and downward revisions to prior months. Those data, together with a tame Consumer Price Index reading of 0.2% month-on-month and 2.7% year-on-year, plus core CPI at 3.1% annualized, have prompted some policymakers and market participants to push back against the Fed's prior hawkish posture. Treasury official Scott Bessent has notably urged a more aggressive 50 basis point easing after what he described as “incredible” inflation data.
Social sentiment and on-chain metrics warrant caution
Despite easing expectations, crypto-specific indicators are flashing warning signs that momentum may be overstated. Santiment reports that chatter mentioning Fed, rate and cut across social platforms recently hit an 11-month high. Historically, such euphoric social sentiment often precedes local market peaks and short-term pullbacks in volatile assets like Bitcoin and Ethereum.
Exchange supply increases raise red flags
Blockchain analytics show Bitcoin exchange balances have risen by roughly 70,000 BTC since early June, reversing the months-long trend of coins moving into long-term cold storage. Growing exchange supply can indicate that holders are preparing to liquidate positions or that selling pressure could build if sentiment shifts. For traders, rising exchange inflows are a liquidity signal to monitor alongside spot price action.
Ethereum MVRV and profit-taking risk
Ethereum looks strong on price performance, but its on-chain metrics suggest traders should remain guarded. Short-term MVRV is approaching 15% while long-term MVRV sits near 58.5%. Historically, these readings have aligned with heightened profit-taking and potential retracements before any sustained advance, implying that ETH may be vulnerable to short-term corrections even in a bullish macro environment.
Political pressure on central banks adds macro risk
Political developments are injecting further uncertainty into monetary policy expectations. European Central Bank President Christine Lagarde warned that any attempt by national leaders to undermine central bank independence would pose a "very serious danger" to global economic stability. In the US, President Trump has ramped up criticism of Fed Chair Powell, demanding immediate cuts, threatening legal action, and insisting tariffs have not contributed to inflation while imposing steep duties on some imports.
How industrial data ties to crypto direction
Analysts are also watching manufacturing indicators as inputs into the Fed's timing for easing and the broader risk backdrop. ISM Manufacturing PMI forecasts center around 48.9, marginally above the prior 48.0 reading. Markets and crypto traders note that a sustained sub-49.5 PMI could extend correction phases for risk assets, whereas improvements in industrial activity would support narratives for recovery and a stronger crypto rebound.
What traders should watch next
For crypto investors, the interplay between macro signals (CPI, payrolls, PMI), political pressures on central banks, and on-chain metrics (exchange supply, MVRV) will determine near-term price trajectories. Short-term traders should be alert to social sentiment spikes and exchange inflows that historically precede pullbacks, while longer-term holders may focus on whether coins resume movement to cold storage. Combining macro awareness with blockchain analytics remains essential for navigating potential volatility as markets price in Fed policy shifts.
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