Surge in Fed Rate Discussions Highlights Potential Risks for Crypto Market

Mentions of a potential Fed rate cut on social media could warn the crypto market, Santiment says.

The increase in mentions of a potential Federal Reserve Fed rate cut on social media could serve as a warning for the cryptocurrency market, according to Santiment.

Experts noted that the main driver of the recent rally was the dovish tone of Fed Chair Jerome Powell, which created a “buy the rumor” atmosphere.

Following the official’s statements, the S&P 500 index reached a new all-time high, moving upwards alongside Bitcoin and gold.

“While optimism about a rate cut fuels the market, social data indicates the need for caution,” analysts noted. 

Mentions of key terms like “Fed,” “rate,” and “cut” on social media have reached an 11-month peak. A sharp increase in discussions around a single optimistic narrative historically points to growing euphoria and signals a local peak, explained Santiment. 

“There is a growing number of forecasts for a ‘higher’ BTC price, while discussions around ETH remain neutral. In the context of Ethereum, watch for a sharp increase in social media posts predicting a price rise after breaking the ATH, as this could indicate a peak in FOMO among retail traders,” researchers emphasized. 

Earlier, some derivatives metrics indicated a risk of the digital asset market shifting to a bearish trend.