Virtual currency market analysis [September 23]
### Fall of Bitcoin and Ethereum
Bitcoin fell sharply from the $116,000 level last week and dropped to $112,000 on Monday.
This level is around the same as the August-end low.
Last Friday, the anticipated 0.25% cut to the FRB policy rate was announced.
Prices had risen before the announcement, but as gold and the Nikkei hit record highs, the cryptocurrency market shifted to decline.
In my view, there aren’t any obvious major external factors. However, September is historically a month when prices tend to fall, and this "anomaly" could be influencing things.
Moreover, from October onward, there are many patterns where prices start to rise.
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Why did prices fall after the policy rate cut was announced? There are questions about this timing of the drop.
Meanwhile, Ethereum is one of the currencies that fell significantly, down 7% vs last week.
Looking at the chart, it is around the lower end of the range since the end of August, near $4,200, and this level seems to be an important inflection point.
This is also the lower bound of the price range that had been trending since June this year.
In response to this decline, Bitcoin's fear-and-greed index fell from 51 last week to 45.
Not at a pessimistic level, but it is tipping toward pessimism.
Major cryptocurrencies are also showing a similar downward trend. Last week, there was $0.55 billion in inflows into Ethereum ETFs, but this decline was matched by outflows of a similar magnitude this time.
### Multiple factors driving the market
In fact, as the Altcoin Index showed last week, the overall enthusiasm in the cryptocurrency market was running high. While I thought this suggested further upside, the rate cut by the Fed had already been priced in, and its synergistic effect may have been limited.
The price drop is not necessarily a bad thing.
It is important to view it as a great opportunity to buy assets cheaply and maintain that perspective.
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### Key points from the Fed Chair’s press conference
In the press conference following the highly watched policy rate announcement last week, the following views were presented.
* **Inflation**: broadly high, production is accelerating, services are cooling. Likely to approach the 2% target next year or later. Tariff effects are uncertain and risk management is required.
* **Economy**: GDP growth slowing due to consumer slowdown.
* **Employment**: Both employment growth and labor demand are slowing.
* **Policy**: Policy is progressing, but effects are uncertain. Respond flexibly to changes in risk balance.
These statements are vague and hard to interpret, but essentially they suggest concerns about stagflation (high prices amid recession).
In other words, there is a nuance of “they had to cut rates reluctantly.”
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### Other notable news
#### Eric Trump: “Cryptocurrencies are a perfect hedge against real estate”
Eric Trump, the son of President Trump, drew attention by stating that cryptocurrencies are a “perfect hedge against real estate.” He is actively involved in the crypto business as well.
This statement likely stems from the fact that cryptocurrencies move differently than traditional financial assets such as stocks or real estate and their independence from government credit. Also, because Bitcoin has a capped supply, it is also viewed as a hedge against depreciation of fiat currency.
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