- Solana and ChainLink prices surged more than 12% following lower-than-expected U.S. inflation data for July.
- Expectations for a Federal Reserve rate cut in September increased among market participants.
- Institutional investors, rather than retail traders, are the primary drivers of the current rally, according to analysts.
- Leverage has grown across digital asset markets, making altcoins more prone to sudden swings and risks of sharp declines.
- Other major cryptocurrencies, including Ethereum, Cardano, Dogecoin, Sui, and XRP, also saw notable gains after the inflation report.
Solana and Chainlink posted significant gains on Tuesday as lower U.S. inflation numbers for July fueled hopes for a Federal Reserve rate cut in September. Solana rose 12.9% to $198.48, while Chainlink gained 12.5% to $24.21 over the last 24 hours, according to CoinGecko.
The rally extended to other major cryptocurrencies. Ethereum climbed 8.6% to $4,670.42, Cardano added 8.9% to $0.85, Dogecoin gained 6.2% to $0.23, Sui advanced 5.9% to $3.91, and XRP increased 3% to $3.25. The Consumer Price Index (CPI) showed yearly U.S. inflation at 2.7%, slightly below the 2.8% expected by economists. Markets responded by placing the probability of a rate cut in September at 82.5%, down from 86% on Monday.
Min Jung, a senior analyst at Presto, noted that institutional investors are leading this rally, in contrast to previous cycles where retail traders dominated. “The current market dynamics are fundamentally different from previous crypto cycles, being driven predominantly by institutional adoption, led by aggressive buying from digital asset treasury companies,” Jung told Decrypt.
Jung described the impact of the latest CPI report: “Yesterday’s upswing…followed the CPI release, which reignited optimism for a September rate cut—a sentiment echoed in the latest FedWatch projections.” Jung also pointed out that the traditional pattern of capital flowing from Bitcoin and Ethereum into altcoins, usually driven by retail speculation, may not repeat if institutional participation remains strong.
Analysts from Bitfinex stated that open interest in major digital tokens had risen from $26 billion to $44 billion in the past month. This reflects an increase in speculative trading. However, they cautioned that more leverage in the market creates higher risks. “The rise in leverage introduces greater systemic fragility, as capital becomes more fragmented across volatile assets,” analysts said, warning this could amplify sudden liquidation events and volatility.
The analysts added that in highly leveraged environments, rapid market reversals could lead to large losses in altcoins if momentum stalls or unexpected events occur.
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