Bears Halt Crypto Market Rally

Tuesday’s crypto market rally came to a halt as bearish sentiment prevailed, with leading assets sitting on modest daily gains after pulling back sharply in the past couple of hours.

Bitcoin (BTC) is up just 0.6% in the last 24 hours, while Ethereum (ETH) gained 0.1%. Polkadot (DOT) rallied 0.9%, and Solana (SOL) tumbled 1%. However, BTC is down 4% from its intraday high of $61,400, while ETH dipped 4.8% after testing $2,700.

Several memecoins are among the strongest performing top 100 assets after suffering sustained losses in recent weeks. Brett (BRETT) is today’s top gainer after a 20% rally, followed by BitTorrent (BTT) with 18% and Aave (AAVE) with 12%. Dogwifhat (WIF) increased by 11%, and FLOKI (FLOKI) surged by 10%.

Fasttoken (FTN) posted the heaviest drawdown with 6.9%, followed by Litecoin (LTC) at 4.8% and Mantra (OM) at 2.3%.

In the past 24 hours, 38,144 traders were liquidated for $86 million. This included $26 million worth of short positions in BTC and $9 million in ETH, according to CoinGlass. Short liquidations occur when prices rise, and traders who bet on falling prices are forced to close their positions at a loss.

Stock markets falter after two-week recovery

The digital asset pullback coincides with U.S. stock market indexes pulling back following two weeks of bullish price action from early August’s lows.

The S&P 500 is down 0.20% in 24 hours, the Nasdaq 100 dipped 0.24%, and the Dow Jones Industrial Average fell 0.12%. The move follows a bullish day for leading Asian markets, with Japan’s Nikkei 225 up 1.80%, South Korea’s KOSPI bouncing 0.83%, and Australia’s All Ordinaries up 0.16%.

Major global stock indexes enjoyed a strong recovery after suffering brutal losses two weeks ago in response to Japan’s central bank increasing interest rates by 0.25% in only its second rate rise from 0% since 2007 and the first in more than a decade.

Investors raced to unwind Yen-based carry trade positions in response, causing a sharp correction across global markets. BTC crashed from roughly $65,000 to $50,000 in just a few days as risk assets were battered.

However, bullish traders quickly stepped in to buy the dip, with analysts and former Bank of Japan officials stating the central bank would likely delay further interest rate hikes until next year.

“They won’t be able to hike again, at least for the rest of the year,” said former board member Makoto Sakurai, according to Bloomberg. “It’s a toss-up whether they can do one hike by next March.”

Gold prices also posted a new all-time high on Tuesday morning, climbing 0.8% to $2,524.88 per ounce and more than $1 million per 400z bar for the first time.

Investors anticipate U.S. rate cut next month

Federal Reserve Chair Jerome Powell is set to speak at the Jackson Hole symposium on Friday. Wall Street is eager for clues about the Fed’s next policy move, with the CME FedWatch Tool indicating a 100% chance of a rate cut in September.

“Markets are now more confident that the U.S. Federal Reserve will cut interest rates by 0.25% at its September meeting,” said Rania Gule, senior market analyst at XS.com — a multi-asset broker. “They also price in the possibility that another negative surprise in jobs data on September 6 could lead to a 0.5% cut.”

Gule speculated that a rate cut would benefit Bitcoin and the broader crypto markets. “When the Federal Reserve cut interest rates in July 2019, Bitcoin initially rose by 20% in a short-term rally,” she said.

However, she noted that Bitcoin ended 2019 down 35% from its post-cut high, despite the Federal Reserve following up with two additional rate decreases later that same year.