As a seasoned crypto investor with a few battle scars to show for it, I’ve learned to approach every market movement with a healthy dose of skepticism and a well-stocked arsenal of patience. The recent 25 bps interest rate cut by the Federal Reserve didn’t quite pan out as expected for Ethereum (ETH), sending its price on a 4.50% downward spiral.
Before Federal Reserve Chair Jerome Powell announced a 25 basis point (bps) interest rate cut, Ethereum (ETH) holders were optimistic that the event would fuel a rally toward $4,500. However, the rate cut did not yield the anticipated bullish outcome, with ETH experiencing a 4.50% decline shortly afterward.
This decrease in value casts doubt on the likelihood of a significant surge in Ethereum, leading us to ponder what may happen next.
Ethereum Changes It Reaction Compared to Last Rate Cut
A few months ago, the Federal Reserve reduced interest rates by 0.5 percentage points, which sparked a significant increase in cryptocurrency prices, including Ethereum. At that moment, there was a general belief that another rate cut might occur before the year finished. Unfortunately, this prediction didn’t come true.
After yesterday’s ruling, ETH’s value decreased from $3,890 to $3,624. Although there has been a slight recovery, various on-chain signals suggest that the recent rise might just be a misleading bounce back.
One sign that could point to this is the discrepancy between the price and Daily Active Addresses (DAA) trend. This price-DAA divergence helps determine if user involvement is coinciding with the price movement. When there’s an upward divergence, it implies greater engagement with the cryptocurrency, which usually bodes well for its future price direction.
Conversely, a low rating suggests reduced interactions, which can be seen as a bearish sign. As per Santiment, Ethereum’s Price DAA divergence has dropped to -98.28%, suggesting less user involvement. If this trend persists, Ethereum’s price might experience a more significant downward trend.
Beyond the given measure, the Coinbase Premium Gap serves as an additional signal indicating potential continued drops in ETH’s value. This indicator compares the price disparity between the Coinbase ETH/USD trading pair and the equivalent pair traded on Binance.
When the cost (or price) of coins on Coinbase is significantly higher than on Binance, it often indicates increased purchasing activity by American investors. This buying pressure could stem from growing regional demand and might lead to an increase in coin prices.
In contrast, if the price on Coinbase is lower than on Binance, it could indicate a decrease in demand within the U.S. market or increased selling from either institutional or individual investors.
The graph you see indicates that the difference between buying and selling prices for Ethereum (ETH) has decreased to -1.96, suggesting a strong trend of sellers in the market after the Federal Reserve’s interest rate reduction.
ETH Price Prediction: Not Yet the Season for $4,500
After reacting to the ETH Fed rate cut, its value started falling due to the emergence of a head-and-shoulders pattern on the 4-hour chart. This pattern, often seen in technical analysis, suggests a possible shift in the trend from rising (bullish) to falling (bearish).
The graph exhibits an upward trend initially, with a rise in price representing the left ‘shoulder’. After reaching a maximum point, or the ‘head’, there follows a downward movement which resembles the right ‘shoulder’. When the price line drops below the connecting line, known as the ‘neckline’, that’s drawn between the two ‘shoulders’, it suggests a shift towards a bearish trend reversal.
In other words, the dependability of this pattern hinges on the level of trading activity. Notably, the trading volume associated with ETH has reduced, causing the price to fall below the neckline.
If the current trend continues, it appears that the ETH price could potentially dip down to $3,501. Yet, should we witness a surge in trading volume accompanied by strong buying interest, this forecast could prove incorrect. Instead, the Ethereum price might soar to reach approximately 4,109, and with continued positive momentum, it could even climb toward $4,500. As a researcher, I am keeping a close eye on these developments.
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2024-12-19 21:54