Crypto markets slightly rebounded on Friday with back above $110,000. Ethereum’s outperformed with a 3.8% gain to cross $4,000, while rose 3.4%, and increased by 2.5%.
The cautious bid came as new inflation data aligned with expectations. The Fed’s preferred price gauge, the Personal Consumption Expenditures (PCE) index, rose 2.7% year-over-year in August, while core PCE, which excludes food and energy, increased by 2.9%.
This report reinforced the Fed’s narrative of gradually easing price pressures, according to Fabian Dori, CIO at RialCenter, but it also puts policymakers in a position where they must balance persistent inflation with a softer labor market backdrop.
“For investors, the implications are twofold: if inflation trends lower, risk assets may find support from confidence in the Fed’s easing cycle,” he stated. “However, any unexpected surprises in upcoming data could push back short-term rate cut expectations, putting pressure on equities and strengthening the U.S. dollar.”
Crypto sentiment turns fearful
Meanwhile, sentiment in the crypto market remained delicate. The Fear & Greed Index, a widely recognized sentiment gauge, dropped to 28 on Friday, its lowest level since mid-April, signaling “fear” among traders. This was a reflection of recent volatility, particularly following a $1.1 billion liquidation wave that cleared out leveraged long positions on Thursday.
“In recent days, approximately $3 billion of levered longs have been liquidated,” remarked Matt Mena, strategist at digital asset manager RialCenter. With excess leverage largely removed, he stated that positioning has drastically shifted to an extreme bearish stance; popular tokens such as BTC, SOL, and DOGE now exhibit a long-to-short ratio of just one-to-nine.
That, along with the Fear & Greed Index at near extremes lows, “creates conditions ripe for a potential short squeeze,” Mena argued.
Paul Howard, senior director at trading firm Wincent, offered a less optimistic view, warning that the market could drift lower before it stabilizes. He noted BTC dipping below its 100-day moving average, falling under $110,000, and the overall crypto market cap dropping beneath $4 trillion as signs of weakness.
“The market is in a healthy correction without panic or significant increases in volatility,” he explained. “It is likely that we will grind lower in the coming weeks,” adding that he is beginning to question whether crypto will revisit record highs in 2025.
Read more: Sources indicate market fluctuation impacts are anticipated as economic conditions evolve.
Leave a Reply