Ethereum (ETH) Faces Price Decline Amid Investor Evaluation of Federal Reserve’s Hawkish Outlook
The value of Ethereum, represented by its native token Ether (ETH), experienced a significant drop of nearly 7% today. This decline can be attributed to a combination of fundamental and technical factors influencing market sentiment.
One prominent factor impacting Ethereum’s price was the Federal Reserve’s recent hawkish stance. Traders evaluated the central bank’s outlook for the remainder of 2023, which signaled a potential increase in interest rates beyond market expectations. Federal Reserve Chairman Jerome Powell emphasized that rate hikes would continue until there is a substantial and meaningful reduction in consumer prices, leading to concerns among investors.
The effects of the Federal Reserve’s hawkishness were reflected in Ether’s price, which has experienced a decline of approximately 7.5% since Powell’s statement. Ethereum has exhibited characteristics of a riskier asset in recent years, displaying a notable positive correlation with major U.S. stock indexes. Consequently, Ether’s value followed the downward trend observed in the S&P 500, Nasdaq Composite, and Dow Jones on June 14 and 15.
Furthermore, the decline in Ether’s price triggered a wave of leveraged long liquidations, totaling $54.95 million on June 15. These liquidations were the highest among the leading cryptocurrencies, as reported by Coinglass. Additionally, the open interest of Ether-linked contracts decreased from nearly $6 billion on June 14 to $5.69 billion on June 15. This reduction suggests that long traders closed their positions by selling Ether, potentially contributing to the accelerated price drop.
The decline in Ether’s price was further amplified by the breach of a significant support level. The token’s value plummeted as it broke below a key support confluence, which consisted of multi-month ascending and horizontal trendlines, as well as the 200-day exponential moving average (200-day EMA) at approximately $1,750.
Despite the recent downturn, there are indications that Ethereum may see a recovery in June. The daily relative strength index (RSI) for ETH/USD has fallen below 30, indicating an “oversold” condition that often precedes a rebound or consolidation.
Moreover, Ethereum’s longer-term chart provides hope for a potential recovery. The ETH/USD pair remains above its 200-week EMA, which has served as a psychological support level since March 2023. Additionally, the 200-day EMA aligns with a lower trendline resembling a bullish flag pattern.
Considering these factors, there is a strong possibility that Ether could experience a price rebound towards the upper trendline of the flag, located around $1,850. Such a recovery would constitute an approximate 15% increase from the current price levels. If the upper trendline is surpassed, Ethereum’s next upside target could be $2,500 in 2023.
In summary, Ethereum’s price decline today can be attributed to various factors, including the evaluation of the Federal Reserve’s hawkish stance and the subsequent impact on investor sentiment. However, there are indications of potential recovery for Ethereum, based on technical analysis and market dynamics.