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Bitcoin and altcoins staged a strong comeback after Jerome Powell, the Federal Reserve chairman, hinted that interest rates would start falling in September. 
Bitcoin (<a href="https://crypto.news/price/bitcoin/" target="_blank" rel="noreferrer noopener">BTC</a>) jumped to $64,000 on Aug. 24 while Ethereum (<a href="https://crypto.news/price/ethereum/" target="_blank" rel="noreferrer noopener">ETH</a>) pushed to $2,765. The total market cap of all coins rose by almost 5% to over $2.26.&nbsp; 
The same trend happened in the stock market, where key indices like the Dow Jones, S&amp;P 500, and the Nasdaq 100 approached their all-time highs. Still, there is a risk that gains in the stock and crypto market will be short-lived. 
<h2 class="wp-block-heading" id="buy-the-rumor-sell-the-news">Buy the rumor, sell the news</h2> 
The market was already factoring in rate cuts for September after the recent <a href="https://www.bls.gov/news.release/empsit.nr0.htm" data-type="link" data-id="https://www.bls.gov/news.release/empsit.nr0.htm" target="_blank" rel="">weaker-than-expected</a> U.S. jobs numbers. The probability in the <a href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html" target="_blank" rel="">Fed Rate Monitor</a> tool has been above 80% in the past three weeks. 
Therefore, <a href="https://crypto.news/bitcoin-raced-to-62k-as-fed-teased-september-rate-cut/" target="_blank" rel="noreferrer noopener">Powell’s statement</a> was just a clue as to what to expect at the next meeting, scheduled for Sept. 18. As such, with a rate cut fully priced in, there is a risk that stocks and crypto will retreat as investors sell the news.&nbsp; 
This trend has happened several times. For example, Bitcoin dropped by almost 10% after halving, while Ether has fallen by double digits since the Securities and Exchange Commission approved ETFs. 
Stocks typically drop sharply after the Fed starts cutting rates. Geiger Capital, a conservative-leaning commentator on X.com, recalled 2001 and 2002 as examples. 
<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter">
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 🔸First Rate Cut – Jan 3, 2001 – S&amp;P 500 fell ~39% next 448 days – Unemployment rose another 2.1% 🔸First Rate Cut – Sep 18, 2007 – S&amp;P 500 fell ~54% next 372 days – Unemployment rose another 5.3% 🔸First Rate Cut – Sep 18, 2024 – ? – ? <a href="https://t.co/ByaP9mtGq4" target="_blank" rel="">pic.twitter.com/ByaP9mtGq4</a>— Geiger Capital (@Geiger_Capital) <a href="https://twitter.com/Geiger_Capital/status/1827033405562765542?ref_src=twsrc%5Etfw" target="_blank" rel="">August 23, 2024</a>
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On the positive side, stocks have done well when the Fed starts cuts, as we saw in 2020 during the early stages of the Covid-19 pandemic. 
Another positive is that these cuts are coming at a time when American companies are reporting strong <a href="https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_081624.pdf" target="_blank" rel="">earnings growth</a>. 
<h2 class="wp-block-heading" id="money-markets-are-seeing-inflows">Money markets are seeing inflows</h2> 
Another reason why cryptocurrencies may retreat after the Fed starts cutting is that low-risk money market funds are still seeing inflows.&nbsp; 
Data shows that these funds had over <a href="https://www.ft.com/content/6e8935e3-c1cf-4a53-9be5-fe7b3b55a394" target="_blank" rel="">$90 billion</a> in net inflows in the first half of August even as expectations of rate cuts rose. These funds now hold over $6.2 trillion in assets. 
The theory has been that risky assets like crypto and stocks will see more inflows as money market investors capitulate.&nbsp; 
This rotation will likely happen, but it will take time since interest rate cuts will likely be gradual. 
 You might also like: <a href="https://crypto.news/ondo-finance-token-at-risk-if-fed-begins-cutting-rates/"> Ondo Finance token at risk if Fed begins cutting rates </a> 
<h2 class="wp-block-heading" id="bitcoin-is-still-forming-lower-highs">Bitcoin is still forming lower highs</h2> 
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 <img loading="lazy" decoding="async" width="1024" height="568" src="https://crypto.news/app/uploads/2024/08/Bitcoin-Price-10-1024x568.png" alt="Bitcoin, altcoin prices pop after Powell's speech: Will the gains be short-lived? - 25"> 
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 Bitcoin price chart | Source: <a href="https://www.tradingview.com/symbols/BTCUSD/?exchange=COINBASE" target="_blank" rel="">TradingView</a>
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Bitcoin rebounded to $64,000 after falling to $49,000 earlier this month. However, this price action is still not yet a complete breakout because it has remained in this range in the past few months. 
Notably, Bitcoin has been forming a series of lower highs since March. The first high was at $73,800 followed by $72,000 and $70,000. As such, a complete bullish breakout will be confirmed if the coin clears the first high at $73,800. Before that happens, there is a risk that Bitcoin will resume the bearish trend. 
On the positive side, the series of lower highs and lower lows has resulted in a falling broadening wedge pattern, a popular bullish sign. 
 You might also like: <a href="https://crypto.news/microstrategy-stock-rises-as-bitcoin-price-pierces-the-falling-wedge/"> MicroStrategy stock rises as Bitcoin price pierces the falling wedge </a>

Bitcoin, altcoin prices pop after Powell’s speech: Will the gains be short-lived?

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