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Despite the ongoing correction, investor sentiment toward buying crypto assets remains positive, as indicated by the so-called Fear & Greed Index, which, as we noted earlier, is still in the "Greed" zone.
Fundamental risks — including political uncertainty, rising debt, and unstable yields — still affect market sentiment.
Meanwhile, the cryptocurrency market is undergoing a correction. Bitcoin's price dropped today to $104,500, its lowest level since May 20. That's nearly 14% below the all-time high of around $119,000, reached last week.
The total crypto market capitalization fell to $3.285 trillion today — a 0.29% decline from the previous day. The altcoin market cap, excluding Bitcoin and Ethereum, currently stands at $254.25 billion.
Nevertheless, the Fear & Greed Index, although it dropped from 74 to 60 out of 100, remains in the Greed zone. Market participants have slightly reduced their appetite for crypto purchases, while some major altcoins have shifted into a medium-term bearish zone.
Economists and crypto analysts attribute the current price dynamics to several factors. Aside from profit-taking after last week's strong rally, the movement may also reflect tempered expectations regarding aggressive interest rate cuts by the Federal Reserve.
Cryptocurrencies, like stocks, are considered high-risk assets. At times, the correlation between Bitcoin (BTC) and the S&P 500 index has exceeded 80% — despite Bitcoin being a single digital asset and the S&P 500 representing 500 of the largest US companies by market cap. Commonly, BTC moves in the same direction as the S&P 500, only with greater volatility.
In a scenario of tighter monetary policy by the Federal Reserve and rising interest rates, the US dollar usually strengthens, while stock markets tend to undergo deep downward corrections.
As is known, the minutes from the latest Fed meeting were released on Wednesday. The FOMC's May meeting minutes emphasized that most participants are concerned about persistent inflation coupled with a potential slowdown in employment. This combination signals the risk of stagflation and supports the Fed's wait-and-see approach.
Key takeaways:
* The Federal Reserve left interest rates unchanged at 4.25%.
* The statement noted "tough choices" between managing inflation and employment.
* The Committee remains cautious, awaiting clearer data on the economic impact of tariffs.
This increases the likelihood that rates will remain elevated, strengthening the US dollar and exerting downward pressure on US equities — and, by extension, on crypto assets.
Investors have now reduced their expectations to just one or two rate cuts by the Fed before the end of the year. This remains a bearish factor for cryptocurrencies.
That said, the overall positive attitude toward crypto purchases persists, as evidenced by the Fear & Greed Index, which remains in the Greed zone, as we previously mentioned.
If today's PCE Index release disappoints dollar bulls, we may see a continuation of the USDX downtrend that began earlier this year — signaling further dollar weakness, as anticipated in our fundamental analysis and outlook titled "Dollar: Ready to Dive."
Investor sentiment in the crypto space remains optimistic, and next week could see a resumption of growth among leading digital assets — if US macro data scheduled for release comes in weak and negative for the dollar.
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