Powell dovish on rates, ETH hits new all-time high—Is the altcoin frenzy about to begin?

Author: 1912212.eth, Foresight News

On the evening of August 22, Federal Reserve Chair Powell's speech finally injected a much-needed boost into the fragile crypto market. At the Jackson Hole symposium, Powell stated that a shift in the risk balance might require policy adjustments, suggesting that downside risks to employment are rising. Markets interpreted this as Powell potentially preparing the ground for a rate cut in September.

Spurred by this positive news, BTC quickly reclaimed the $112,000 mark, surging 2.95% within an hour and briefly climbing above $117,000. ETH performed even more impressively, rallying from around $4,200 to hit a new all-time high of $4,887.59 at approximately 5 a.m. on August 23. The ETH/BTC exchange rate rose to 0.0418, reaching its highest level since October 2024. Many altcoins also benefited from the broad market rally, seeing strong rebounds.

In terms of derivatives data, Coinglass showed over $694 million in liquidations across all markets in the past 24 hours, with over $468 million coming from long positions.

Powell Softens Tone, Market Prices in Two Rate Cuts This Year

Prior to Powell’s speech, bearish sentiment had dominated, with some traders exiting positions in anticipation of a hawkish tone, leading to a significant drop in the crypto market ahead of the event.

Surprisingly, Powell’s key remarks indicated that current conditions suggest rising downside risks to employment. Such a shift in risk balance may necessitate interest rate cuts.

Powell noted that stable labor market indicators like unemployment allow the Fed to cautiously consider adjusting its monetary policy stance, opening the door for a September rate cut.

According to CME's "Fed Watch" tool, the probability of a Fed rate cut in September jumped to 91.2% following Powell’s comments.

Nick Timiraos, a prominent journalist at The Wall Street Journal often referred to as the "Fed's mouthpiece," reported that Fed Chair Powell opened the door to a rate cut as early as next month’s meeting, citing growing concerns about a sharper slowdown in the labor market, which could offset worries about inflation driven by tariff-related cost increases. However, Powell tempered market expectations of consecutive aggressive rate cuts by reiterating concerns about inflation, which has remained above the Fed’s 2% target for over four years.

Deutsche Bank now expects the Fed to cut rates by 25 basis points each in September and December, revising its previous forecast of only one cut in December 2025.

Kathy Bostjancic, Chief Economist at Nationwide, said the Fed will likely deliver a cumulative 75 basis point rate cut by year-end. She noted: "Powell adopted a clearly more dovish tone and significantly opened the door to a September cut, emphasizing that downside risks to employment are rising substantially. This supports our view of a 25 basis point cut next month, and we continue to expect a total of 75 basis points in cuts by year-end as the labor market weakens further, while inflation pressures remain modest and temporary."

The Kobeissi Letter analyzed the significance of Fed Chair Powell’s remarks today: "Today’s speech signals that their (the Fed’s) primary focus has shifted toward supporting the labor market. A change in the risk balance may require policy adjustment—he explicitly refers to the labor market. Hence, upcoming employment reports will determine the path of future rate cuts."

The next Federal Reserve interest rate decision will be announced at 2:00 a.m. Beijing time on September 18.

Ethereum Spot ETF and Stablecoin Data Show Positive Trends

As one of the key indicators for tracking capital flows, Bitcoin spot ETF data remains bleak, showing substantial net outflows in recent days, reflecting strong risk-averse sentiment in the market.

In contrast, after four consecutive days of net outflows, Ethereum spot ETFs turned positive again on August 21, recording a net inflow of $287.61 million. The total net inflow currently stands at $12.09 billion. This suggests that the market may be betting on Ethereum for higher returns.

Stablecoin inflows continue to grow steadily.

According to defiLlama, the total market cap of stablecoins is now $27.774 billion, up 0.96% ($2.645 billion) over the past seven days. Among them, USDT saw a monthly increase of 2.6%, USDC 4.63%, and USDe a staggering 80.87%.

In addition, the highly anticipated token WLFI is scheduled to launch trading and initial claims on September 1 at 8:00 p.m. Early supporters will be able to claim 20% of their allocation simultaneously, and the token will be listed on major DeFi DEXs and centralized exchanges (CEXs). Backed by the Trump family, WLFI carries inherent political appeal. Its token launch could attract significant attention from politically motivated crypto investors, especially users in the U.S., providing short-term market momentum and liquidity injections.

Market Perspectives

Raoul Pal, former Goldman Sachs executive and founder of macro research firm Real Vision, shared a technical analysis suggesting that Total3 (altcoins excluding BTC and ETH) is approaching a turning point.

Data analytics firm Altcoin Vector analyzed that as ETH provides momentum and spillover effects to other tokens, once ETH stabilizes above its all-time high, altcoins could explode across the board.

Weiss Crypto analyst Juan stated that altcoins won’t go "crazy" until ETH breaks $5,000. The peak of this rally could occur between September 13 and 20, with the latter date being more likely. Until then, the market is expected to remain in an overall upward trend.