Bitcoin’s value has soared above US$123,000, marking a 30% increase this year. It continues to climb alongside Ethereum, which is now over US$4,700. This upward trend persists despite no major news. Speculation about possible interest rate cuts by the Federal Reserve is boosting gains against the US dollar.

The Impact Of Rate Cuts

The market is rallying because many expect the Federal Reserve to lower interest rates soon. A weaker dollar makes assets like Bitcoin more appealing. This belief grew stronger when July’s inflation rate came in at a lower than expected 2.8%, increasing chances for a rate cut this September. For options traders, this scenario favors buying strategies. There is more demand for call options than for put options, as shown by the positive 25-delta skew for September and October contracts. Consider purchasing call spreads to benefit from further gains while keeping your maximum risk clear. In the futures market, expect costs to hold long positions since funding rates for perpetual swaps remain consistently positive. This indicates strong bullish sentiment, but be cautious about using excessive leverage. A market filled with long positions can be at risk of a sudden drop. This price movement resembles the rally that followed the approval of spot ETFs in 2024. We are seeing significant net inflows into those products again, with reports of over $1.5 billion added in the past 30 days. This demand from institutions provides solid support for the market.

Ethereum’s Fundamental Strength

Ethereum is showing strength beyond its link to Bitcoin. The amount of ETH staked has recently surpassed 30% of the circulating supply for the first time. This reduces the supply available for sale and indicates strong confidence among holders. The main risk to this trend is if the Federal Reserve does not follow through with the expected cuts. All eyes will be on the upcoming Jackson Hole Symposium later this month for any changes in the Fed’s tone. A surprisingly hawkish message could quickly reverse the recent gains. Create your live VT Markets account and start trading now.

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