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The Federal Reserve has already cut interest rates in the U.S. by 50 basis points in its September FOMC meeting. With the ink hardly dry on the announcement, the market is forecasting the same again in the Fed’s November meeting. Risk assets are likely to be big beneficiaries of such a move, and altcoins are putting on gains in anticipation.
Another big rate cut on the way?
The CME Group FedWatch Tool is currently showing a 60.8% chance of a further 50 basis point rate cut, which would be announced on 7 November at the next Federal Reserve meeting. A 25 basis point cut is only a 37.2% chance at this moment in time.
This forecast has the markets predicting rapid and extensive cuts. The Federal Reserve itself anticipates a total of 125 bps before the year is out, which if this were to take place, would leave room for a last 25 bps cut in December.
Of course, it’s not just the Federal Reserve that is cutting its rates. The central banks of all developed nations are also cutting, and most have signalled that there is more easing to come.
In this kind of environment, risk assets are the most likely to be the fastest movers. Moving along the risk curve, Bitcoin (BTC/USD) can certainly be a beneficiary, and then, riskier still, there are the rest of the cryptocurrencies. With such small market capitalizations, some of these have the potential to massively outperform.
Total3 breaks out
Source: TradingView
A chart that is displaying the recent move by the altcoins, is Total3. This is the combined market capitalization of all the cryptocurrencies, with the exception of $BTC and $ETH.
It can be seen that the altcoins market cap has been in a bull flag, just like $BTC, since the first quarter of this year. The chart shows a breakout and a retest, with the combined market cap possibly about to make a higher high.
That said, the price has come up to the horizontal resistance level, also delineated by the 0.5 Fibonacci. There is the possibility of rejection from here, but having just broken out of the bull flag, and with the Stochastic RSI momentum indicator on the weekly time frame signalling bullish upside momentum, it could be more likely that the price continues upwards.
Solana ($SOL) leads the way
Source: TradingView
One of the major altcoins, already taking advantage of increased liquidity, is Solana (SOL/USD). Up nearly 5% on the day, $SOL is the main layer 1 competitor to Ethereum. The $SOL price burst through the descending trend line on 19 September, and has been steadily climbing since then.
The $SOL price is currently surpassing the 0.5 Fibonacci resistance at $152. If successful, the next targets would be $162, and $176, as shown on the chart.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
