As a seasoned analyst with over two decades of experience in the financial markets, I have seen numerous bull and bear cycles unfold. The current downtrend in the crypto market, with AVAX following suit, is reminiscent of certain periods in the past that were characterized by uncertainty and volatility.
The price of Avalanche (AVAX) is currently on a slide, reflecting the broader market’s downward trend. Other digital currencies are also facing decreases in value. Of particular note, Bitcoin has dipped below $58,000, causing a substantial drop in many major altcoins. This market behavior has raised worries about a possible bearish phase in September.
Lately, Avalanche (AVAX) has seen a significant drop due to broader economic turbulence. At a crucial resistance point, the coin was denied, causing a shift towards a more bearish trend. Currently, it seems ready to challenge the bottom limit of its ongoing triangular trading range.
AVAX Price Dips as Fed Rate Cuts Stir Uncertainty
Arthur Hayes, Co-Founder of BitMEX and Chief Investment Officer, recently expressed his viewpoint in a post on why he thinks the Federal Reserve’s interest rate reductions are proving to be counterproductive. Although there was an announcement of a rate cut at Jackson Hole, he observed that the price of Bitcoin dropped by 10%. This contradicts the common belief that rate cuts strengthen risk assets such as cryptocurrencies.
In simpler terms, Hayes mentioned that the Reverse Repurchase Agreement Rate (RRP), which yields 5.3%, seems more enticing compared to Treasury bills that mature in less than a year. Consequently, this preference towards the RRP by money market funds is leading to a decrease in liquidity.
My theory on why Fed rate cuts aren’t going to plan.
As a crypto investor, I was taken aback when Bitcoin dipped 10% after the September rate cut announced by the Federal Reserve. I had assumed that rate cuts would be beneficial for riskier assets like cryptocurrencies. However, this recent move seems to challenge that assumption.
As a researcher, I’ve observed an intriguing trend in the financial market: Reserve Repurchase Agreements (RRP) currently offer a return of 5.3%, outperforming any Treasury Bill with maturity less than one year. Given this situation, Money Market Funds might consider shifting their investments from Treasury Bills to RRPs, as the latter offers a negative liquidity position.
Since…
— Arthur Hayes (@CryptoHayes) September 2, 2024
Given the overall bearish sentiment, Avalanche’s price has also dipped, mirroring broader market movements. According to Hayes, as long as Treasury bill rates stay below the Reserve Repurchase Agreement (RRP) rate, the current market conditions are likely to continue, potentially influencing cryptocurrencies such as AVAX. He intends to delve deeper into this topic and explore other implications of Federal Reserve policies during his upcoming keynote speech at the KBW conference.
AVAX Price Forecast: More Bearish or Bullish Trends Ahead?
For the last day, the Avalanche price has shown considerable ups and downs. At the moment of reporting, the cost of AVAX was around $22.12, representing a drop of 1.09%. Yet, CoinMarketCap statistics suggest that the AVAX trading volume spiked by an impressive 53.62%, suggesting increased market activity.
As an analyst, I’ve observed that the MACD line has just crossed below the signal line, indicating a possible prolongation of a bearish trend in the near future. This crossover is also accompanied by the MACD bars shifting from green to red, reinforcing the potential persistence of a downtrend.
Based on Coinglass’s data, there has been a notable up-and-down trend in trading activity. The trading volume increased by an impressive 38% to reach approximately $409 million. However, the open interest dropped slightly by 0.18%, amounting to around $213 million. This contrast suggests that traders are adjusting their positions and the market is experiencing a shift in liquidity.
The cost forecast for Avalanche is at a crucial juncture in its price path, encountering a substantial obstacle at around $25. Breaking through this hurdle could lift its worth to approximately $30. If this optimistic trend persists, the digital currency may climb up to $40 by the end of September. With robust bullish energy, AVAX might surge as high as $50 during the next major market surge.
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2024-09-02 18:12