Analyst Reveals Key Factors Behind Crypto Market Struggles

• Analyst highlights the potential for a crypto market recovery despite current dips, citing upcoming interest rate cuts.
• The Federal Reserve may implement a second 50-basis-point cut, spurred by easing inflation and a solid labor market.
• Political tensions surrounding the upcoming U.S. elections are intensifying, influencing market sentiments and economic forecasts.

Crypto analyst Lark Davis  announced on X that positive market sentiment is imminent, urging traders and investors to focus on key market indicators rather than the recent dip.

Davis pointed out that the U.S. elections are just 33 days away, and the Federal Reserve is expected to cut rates by another 50 basis points before year-end.

He also looked at nations that are fervently reducing the interest rates, especially China. Davis also stressed upon the FTX’s $16 billion cash repayments fast approaching. “You’ll be laughing about this dip in a few weeks from now!” he stated.

Fed Rate Cuts Could Boost Economic Activity

Citing Reuters, he stated the Federal Reserve is likely to deliver another 50-basis-point interest rate cut in November. Traders expect this based on a recent government report showing a decline in U.S. inflation.

The year-over-year rise in the personal consumption expenditures price index was reported at 2.2% in August; matching the Fed’s 2% target. Fed Chair Jerome Powell had foreseen this cooling inflation during a news conference after last week’s half-point cut.

Moreover, the initial rate cut aimed to support the slight downturn in the labor market, which stayed solid. “If the Fed wants to cut by another 50 basis points in November, the inflation data isn’t going to stand in their way,” wrote Inflation Insights analyst Omair Sharif. He suggested that the faster inflation cools, the more motivation there is for the Fed to act swiftly to reach neutral rates.

Market Reacts to Rate Adjustments

Interest rate futures contracts currently show a 54% probability of a half-point cut in November, reflecting traders’ confidence in the Fed’s ability to adjust rates.

In comparison, there was still a 46% chance of a quarter-point cut. Either way, traders are betting that the current policy rate, between 4.75% and 5.00%, will drop by 75 basis points by year-end. By mid-2025, the expected range is between 3.00% and 3.25%.

Read also: Breaking: Federal Reserve Anticipates Three Interest Rate Cuts in 2024

These levels sit just above the Fed’s neutral rate, which neither stimulates nor slows down a healthy economy. Hence, the upcoming rate cuts could lead to increased borrowing and spending, potentially reinvigorating the broader economy and the crypto market.

Political Tensions and the 2024 Election

Subsequently, Donald Trump has ramped up his attacks on Special Counsel Jack Smith. Trump criticized Smith after the counsel outlined a substantive criminal case against Trump. The allegations involve Trump’s purported attempts to overturn the 2020 election results.

Smith’s latest court filing detailed Trump’s alleged “increasingly desperate efforts” to maintain power through false claims of election fraud.

In response, Trump took to Truth Social. He claimed that the allegations were an “obvious attempt by the Harris-Biden regime to undermine and weaponize American democracy.” Trump’s comments reflect the heightened political tensions leading up to the 2024 presidential election.