The cryptocurrency market has experienced a significant surge in recent days, with Bitcoin (BTC) and other major cryptocurrencies posting substantial gains. The rally was largely fueled by the US Federal Reserve’s decision to cut interest rates by 50 basis points, the first reduction since 2020. However, analysts are cautioning that the sustainability of this rally is uncertain, citing its dependence on futures and perpetual markets.

Ethereum Outpaces Bitcoin, Posting 15.5% Gains

Ethereum (ETH) has been the standout performer, with a 15.5% increase in the past seven days, outpacing Bitcoin’s 8% gain. Other major cryptocurrencies, such as Binance Coin (BNB), Solana (SOL), and Dogecoin (DOGE), have also posted significant gains, while XRP has remained relatively flat.

Fed Rate Cut Sparks Hopes of Soft Landing

The Fed’s decision to cut interest rates has revived hopes of a soft landing in the US economy, a slowdown in growth without triggering a recession. This has led to a rally in both US equities and Bitcoin, with the latter posting a 5.2% gain within 24 hours of the announcement.

Sustainability of Rally in Question

However, a report by Bitfinex suggests that the rally may not be sustainable in the short to medium term. The report notes that Bitcoin’s failure to surpass the $65,200 level, which it reached in late August, could spell trouble for the cryptocurrency. Additionally, the rally is being driven more by futures and perpetual markets than by actual trading, raising concerns about its sustainability.

US Presidential Election May Impact Crypto Market

Analysts are also warning that the upcoming US Presidential election in November could have a significant impact on the crypto market. While some believe that a Donald Trump presidency would be beneficial for the crypto sector, fund manager VanEck has a different view. According to VanEck’s Head of Digital Assets Research, Matthew Sigel, a Kamala Harris administration may tighten US digital asset regulations, potentially slowing institutional adoption but boosting Bitcoin due to increased structural challenges driving its adoption.

Potential Impact of Harris Presidency on Bitcoin

Sigel believes that a Harris presidency could be even better for Bitcoin than a second term for Trump, as it may address some of the structural issues that drive Bitcoin adoption. Conversely, a Trump administration may deregulate more, benefiting the broader crypto ecosystem, particularly entrepreneurs.

Weakening US Dollar Could Benefit Bitcoin

Regardless of who wins the election, the ongoing fiscal deficits and national debt are expected to weaken the US dollar, a situation in which Bitcoin often flourishes, according to Sigel.

In conclusion, while the crypto market has experienced short-term gains, analysts are cautioning that the sustainability of this rally is uncertain. The upcoming US Presidential election and potential changes in regulations could have a significant impact on the crypto market, and investors should be aware of these factors when making investment decisions.