Ethereum (ETH), the second most valuable cryptocurrency in the world by market capitalization and the currency that powers the smart-contract-enabled Ethereum blockchain, is in consolidation mode before what has been called one of the most important Fed policy announcements in years.
Ether was last traded for just over $1,800. It had a good bounce from its lows for the week, which were in the $1,720s on Tuesday.
The value of the cryptocurrency had gone up about 6% in the last week.
Price Prediction – How the Fed’s Balancing Act Could Impact Ethereum (ETH)
The federal fund’s target range is expected to go from 4.75 to 5.0% after the US central bank raises interest rates by another 25 basis points.
But after a number of regional US banks failed earlier this month and there are signs that contagion is still a threat to dozens more, the bank is likely to change its tone about the outlook for further tightening.
But the Fed has to strike a balance because US inflation is still well above their 2.0% goal, so they won’t want to make things too easy on the economy.
Ether could easily drop to new weekly lows below $1,700 if the Fed’s message is seen as more hawkish than the markets were expecting (i.e., they play down risks to financial stability and stress that the fight against inflation isn’t over).
But if this causes more problems for banks that are already having trouble, it could help crypto again as investors move money to assets seen as “hedges” against problems in the traditional financial sector (i.e. gold and blue chip cryptos like Bitcoin and Ether).
On the other hand, if the Fed comes across as more dovish than the markets expected, that could lead to a broad risk-on, which is likely to boost Ether.
ETH/USD bulls would want to see a test of the highs from last August, before “Merge,” in the $2,030s, which would be a 12% increase from where the price is now.
How High Can Ether (ETH) Go in 2023?
Troubles in the US (and global) banking sectors seem to have caused a key shift in the macro narratives that drive traditional asset classes and cryptocurrencies. This could have a big effect on the outlook for Ether in 2023.
First of all, if you believe the prices on the money market right now, a dovish shift from the Fed seems to be right around the corner.
This means that the outlook for the rest of 2023 is more likely to be for much easier financial conditions than for tighter ones. In the past, this has been good for cryptocurrencies like ETH.
Cryptocurrency, led by Bitcoin, also seems to be getting a boost from investors looking for a safe place to put their money. Investors are finally starting to see blue-chip cryptocurrencies as a real alternative to the mainstream, fiat-based financial system.
If the spread of contagion in the US banking space keeps going, it will probably help Ether rather than hurt it.
The recent strong bounce of ETH/USD off of its 200-Day Moving Average and the recent golden cross (when ETH’s 50DMA moved above its 200DMA in early February) are both bullish technical signs for the long term.
ETH Supply Deflation Could Make Up for Weak On-chain Activity
ETH Supply Deflation Could Make Up for Weak On-Chain Activity According to on-chain data presented by The Block, activity on the Ethereum blockchain has not yet shown the kind of pick-up that has been needed in the past for an ETH bull market to really get going.
The number of daily active and new addresses, as well as the number of daily transfers, are still within the ranges of a bear market.
If Ether wants to reach new all-time highs, these are likely to need to get a lot better.
But ETH could still get a boost from its rising deflation rate, which briefly topped 5% on an annualized basis a few weeks ago (though it was last around 0.6%).
People are also saying that the “Shapella” upgrade to the Ethereum network, which will happen in the middle of April, could be a big boost for ETH.
Withdrawals of staked ETH will be possible for the first time after the upgrade. More flexibility is likely to encourage more investors to stake their ETH tokens in the long run.
This could reduce the amount of ETH in circulation (if ETH holders want to leave their tokens to earn interest for a long time), making it harder to find on exchanges and driving up prices.
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