The crypto market is more sensitive to uncertainty than high interest rates. As the sentiment of the crypto market moves out of extreme fear with the US-Iran conflict reaching a de-escalation and the Fed rates to be announced, the markets reveal their sensitivity to uncertainty.
The crypto market is more susceptible to uncertainty than higher interest rates. According to Santiment, a crypto market intelligence tool, as the search volume of terms like ‘war ending’ or other terms representing the de-escalation of the war spikes, the market has reacted and at times recovered much more than lower interest rates.
The main reason for the markets to not react to interest rates is because the prediction markets and other event prediction markets already give out the possible outcome. As such, the market has already priced it in.
With the Fed prediction market now signally that there is a 99% chance of the interest rate being unchanged, the narrative in the crypto market is not about rates anymore but about whether new Fed Chair Kevin Warsh’s accompanying comments strike a balanced tone and avoid signaling a more aggressive policy path ahead.’
The upcoming Fed meeting is less about the decision itself and more about how the narrative evolves, especially as this is the first meeting under the new chair, Kevin Warsh. Hamza Dweik, Head of Trading (MENA), Saxo Bank
Crypto market sentiment moves out of extreme fear
With uncertainty removed out of the equation, the crypto market is recovering, be it in overall trader sentiment or the prices; conditions are getting better for traders. For instance, the fear and greed index, which gauges the overall sentiment of the traders, shows that the market is moving out of extreme fear. During the last week, the market sentiment reached extreme fear levels, showing values below 15.
However, currently the market has moved out of extreme fear on the indicator, and the value has hit 24, which is still in the fear zone. Fear on the Fear & Greed Index is often considered healthy because it reflects caution rather than panic.
When investors are fearful, speculative excess is reduced, leverage tends to decline, and prices become more grounded in fundamentals. This creates a more sustainable environment for a market recovery since there is less risk of a sudden sell-off caused by overcrowded bullish positions.
Extreme fear, however, is a different story. It signals widespread panic, uncertainty, and a lack of confidence among market participants. During periods of extreme fear, investors may sell assets regardless of their underlying value, causing sharp price declines and increased volatility.
Bitcoin ETF’s profuse bleeding stops while ETH attracts inflows
It’s not just the market sentiment that has gotten better, but even the crypto ETFs have gained some momentum. In terms of Bitcoin, there is still some fund leaking out of it; however, when comparing the outflow during the past 30 days with what’s happening now, the bleeding has reduced quite drastically, although there is still no net positive flow.
Unlike BTC, which is still dealing with the outflows, ETH has already crossed into the positive zone. This shows that the transition has started to happen.
