3 Reasons Why Crypt Markets Could Explode Soon

Key Insights:

• The Fed Chair candidate, Christopher Waller, expected rates cut in the next 3 to 6 months.
• The US M2 money supply surged +4.8% YoY in July, to a record $22.12 trillion.
• Ethereum’s total daily USDT transfer volume showed a clear pattern since the cycle low.

The cryptocurrency market was oscillating between the $4 trillion capitalization and $3.70 trillion over the last few weeks. The sentiment has been mixed with positive news sparking bounces to the upside, while institutional activity like that of Binance countered it.

The feeling around participants, experts and those in the corridors of power was that the markets could explode soon.

With 2025 being a year after the Bitcoin halving, it is suggested that altcoins could outperform the ‘digital Gold’ by gains. Over the last four months, about 56 altcoins have done better than BTC as of press time. Once the number eclipsed 75, the Altcoin season would enter a full throttle phase. Still, that did not mean BTC would fall; rather, it would have lesser gains.

Having said that, what were the main reasons supporting this potential explosion of the markets? Will it spill over to other risk-on assets?

Fed Chair Nominee Comments on Rate Cut

One of the main factors was the interest rates. The Federal Reserve leadership continued to face uncertainty, especially after President Trump fired Lisa Cook, one of the members. This sacking came after Cook was accused of mortgage fraud, prompting the nomination of candidates to join the board.

Christopher Waller, one of the Fed Chair candidates, commented on the upcoming interest rate adjustment in September. Waller said, “As of today, I expect further rate cuts within the next three to six months.” This backed the hints made by Fed Chair Jerome Powell during the Jackson Hole Symposium.

The probability of rates at 4.25% to 4.50% bps was at 14.7% while that of 4.00% to 4.25% was at 85.3%. The later had declined from levels above the 90th percentile in the last few weeks.

The Fed’s narrative was gradually shifting to a more optimistic one. Waller’s comments just added to the chapter. However, some participants thought the period was too long as the expectation was that the cuts would start in September.

If the Fed implemented the rate cuts over the period, as Waller said, Bitcoin and other risk-on assets could soar. Stocks and treasury bonds were also in line for a similar anticipation.

The Surge In US M2 Money Supply

Another reason to anticipate an explosion soon was the rise in M2 Money Supply.

Per data from The Kobeissi Letter on X (formerly Twitter), this metric hit record levels in July. This was 21st consecutive month with the figure rising by over 4.8%, reaching $22 trillion. The growth was 3 times that of July 2024, adding to the rise (roughly 6.30%) sustained since the post-COVID period.

This was an indication that money was flowing into the markets. Also, that of China was rising. Generally, nations were pumping capital into the markets, further supporting the anticipation.

This growth in M2 money supply met the highest increase in the inflation rate since February 2022. All this happened against the backdrop of the declining purchasing power of the U.S. dollar.

Total Daily USDT Transfer Volume

Still, the total daily USDT transfer volume on the Ethereum network was surging. Another indication of capital inflow, specifically into the crypto markets. Historically, this 250% increase in USDT has been the case each time Bitcoin has had a major rally.

As a result, BTC entered a consolidation phase, indicating that capital was rotating into stablecoins for deployment into assets.

In conclusion, the markets could explode soon, but were dependent mainly on the Fed cutting rates. This would align with the broader market feeling. The 3 to 6 months timeframe suggested the rate cuts could be delayed.

Disclaimer

This article is for informational purposes only and provides no financial, investment, or other advice. The author or any people mentioned in this article are not responsible for any financial loss that may occur from investing in or trading. Please do your research before making any financial decisions.