Will Ethereum Price Crash due to Fed Rate Hike?

The Ethereum price has been trading in a narrow range over the past few weeks. It might change soon as investors are waiting for indications from the Federal Reserve. The coin is currently trading at $2,678 after recovering a bit yesterday. Ether’s market capitalization is about $314 billion. That means investors have lost over $200 billion in the last few months.

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Fed decision is imminent

The Federal Reserve is the most important authority on global markets. Its decision to cut interest rates and introduce open-ended quantitative easing in 2020 helped stabilize the global economy.

Consequently, many stocks grew to all-time highs, with the market capitalization of companies such as Apple and Microsoft rising to over $2 trillion.

This policy also led to a rise in cryptocurrencies. In fact, most coins saw their prices jump, while the total value of locked tokens (Total Value Locked) in DeFi projects rose to more than $200 billion. The total market capitalization of all digital currencies rose to more than Us$3 trillion.

Ethereum was a big beneficiary of this development. For one, its price, like that of most cryptocurrencies, rose from less than $200 in 2020 to nearly $5,000.

For another, Ethereum benefited from the expansion of its ecosystem. Over the past two years, we have seen sectors like DeFi, Non-Fungible Tokens (NFT), and Metaverse do well.

Therefore, there are concerns that the Fed will wipe out all these gains and crash the Ethereum price. For one, the Ethereum price has plummeted by over 40% since its all-time high in November. This development came at a time when the bank decided to reduce its securities purchases.

There are two schools of thought. First, some analysts believe that the Fed’s rate hike will lead to lower Ethereum prices. Also, risky assets tend to perform worse during a period of high-interest rates.

Secondly, some believe that the price of the coin will rise again as the scenario of a Fed rate hike has already been priced in by investors. Therefore, a rate hike will lead investors to buy the coin after concerns about the hike subside.

Ethereum Price Forecast

The daily chart shows that the Ethereum price has been moving in a narrow range over the past few days. As a result, the coin remains at the line of the moving averages of the last 25 and 50 days. A closer look shows that the price has formed a symmetrical triangle pattern. In price action analysis, this pattern is usually a sign that a breakout is imminent.

Therefore, it is likely that the ETH price will initially fall after the Fed rate hike and then resume the uptrend. The next important resistance to watch out for is at $3,000.

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(Featured image by elifxlite via Pixabay)

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First published in CRYPTO MONDAY, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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