Key Takeaways:
- Ethereum (ETH) bounced up from a 5-month low.
- Lack of on-chain activity and several macroeconomic factors dampen the bullish prospects.
- The alpha altcoin prepares for a breakout against Bitcoin, charts testify.
YEREVAN (CoinChapter.com) — Ethereum (ETH) price gained 5% in the previous three days and reached over $1,620 in the European session on Sep. 14. Notably, the uptick came after bottoming out at a 5-month low of $1,550 on Sep 11, resulting in an 18% drop the month prior.
Meanwhile, the question remains: is it a good time to increase Ethereum exposure? Let’s look at the broader market conditions.
CPI-led FUD Could Hit Markets
The second-largest cryptocurrency with over $195 billion in market cap is susceptible to macroeconomic challenges. The latest CPI report showed a hotter-than-expected August inflation at 3.7%, which could be an additional headwind to the crypto market.
The possible continuation of quantitative tightening policies could push Ethereum and the rest of the crypto sector into a ditch. In short, the raised interest rates slow down the economy to cap the growing inflation.
In doing so, the Fed creates a liquidity crunch across the markets. Less cash in investors’ pockets equals less desire and opportunity to park it in the crypto sector.
Interestingly, since the CPI numbers were released, the digital asset market added $16 billion to its overall valuation. However, on-chain metrics show that there’s not enough activity to fuel the rally much longer.
For example, according to Etherscan data, the average fee for transfers on Ethereum stood at $1.83 on Sep 11, while the cost of token exchange via Uniswap was approximately $4.17, levels not seen since November 2022.
As the demand for gas on Ethereum goes down, ETH has turned inflationary, a worrying sign for the asset.
Moreover, macroeconomic ripples take time to sink in. Nigel Green of deVere Group agreed, saying that investors have become more wary of the Fed veering the economy into a recession.
The time lag for monetary policies is incredibly lengthy. It takes around 18 months for the full effect of rate hikes to make their way into the economy. […]The effects of previous Fed actions haven’t come through fully, but they will, and an increase could cause years of damage.
the expert told CoinChapter.
SEC Unlikely to Approve ETH ETF Soon
Meanwhile, 2023 saw a rise in cryptocurrency-based exchange-traded fund (ETF) filings with the US Security and Exchange Commission (SEC). Bitcoin spot ETF filings from prominent market players, such as BlackRock, VanEck, and Fidelity, generated a lot of buzz.
However, Ethereum spot ETF filings did not lag, further inspired by Greyscale’s victory in court. Volatility Shares initiated the wave with an Ether Strategy ETF filing on July 28. James Sayffart of Bloomberg Intelligence believes the chances for an Ethereum-based spot ETF approval increase with time.
Vetle Lunde, senior analyst at K33 Research, also saw Ethereum spot ETFs as a valid possibility that could substantially justify increased ETH exposure. However, he outlined several factors that could put a spoke in ETH’s wheel.
Compared to BTC, ETH is more challenging to classify as either a commodity or a security. Both the ICO and staking dynamics could [make] approval harder to attain. On multiple occasions, Gensler [SEC Chair] has been quoted as saying that more or less all crypto assets apart from BTC are securities.
commented the expert in the latest K33 research.
While the SEC explicitly stated that ETH is not a security in 2018, Gensler’s attitude towards altcoins and staking services has been less than kind. Hence, the ongoing SEC vs. Coinbase lawsuit related to offering staking as a service.
Bullish Bonus — ETH/BTC Gears For Breakout
Despite many bearish factors, the ETH/BTC chart added a bullish spin to the outlook. ETH price dropped over 25% against the alpha crypto since September 2022. However, the price action formed a bullish falling wedge, best visible on the weekly chart.
The formation consists of two converging trendlines that take the asset value incrementally lower and lower the price swing. If the token breaches the resistance line, the subsequent rally could equal the maximal wedge height, pinning the target at 0.08 BTC, or 30% higher than the current value.
ETHBTC still trades at range lows but has expressed mild strength in the last week.[…] As ETHBTC still trades below 0.065, the risk-reward of a temporary overweight exposure in ETH for the next two months is a trade worth taking.
Lunde said, citing ETH/BTC as a bullish factor.
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