Ether's Surge Driven by Anticipated Federal Rate Cut Amid Economic Uncertainty
According to Cointelegraph, Ether's recent climb to over $4,700 is largely fueled by expectations of a U.S. federal rate cut in September. Crypto analysts caution that if this anticipated rate cut does not occur, it could have adverse effects on the market. Pav Hundal, lead analyst at Swyftx, highlighted that the current market movement is based on the assumption of a forthcoming rate cut by the Federal Reserve. Ether (ETH) is trading at just 2.80% below its all-time high from 2021, as per CoinMarketCap data. Market participants are predicting a 95.8% likelihood of a rate cut in September, according to the CME Watch Tool.
Hundal noted that Ether appears to be "priced for perfection," which necessitates caution. He pointed to the increasing Ether ETF flows and stable funding rates as indicators of this precarious situation. On Monday, spot Ether ETFs experienced their largest day of net inflows, with total flows across all funds reaching $1.01 billion. Over the past week, the asset has surged by 30%, and it has risen 74% over the past year, according to CoinMarketCap.
Charles Edwards, founder of Capriole Investments and REF, expressed optimism about Ether's future price trajectory but acknowledged that unexpected actions from the Federal Reserve could impact the market. He speculated on potential scenarios such as inflation spikes or geopolitical tensions that might lead the Fed to reconsider its rate cut decision. Edwards warned that such developments could cause liquidity to freeze and halt capital flows. Despite these uncertainties, Edwards remains bullish on Ether, citing strong institutional demand surpassing Bitcoin's and ETH's supply as a positive factor. He believes Ether could "quite easily double" in the coming months if Bitcoin reaches between $150,000 and $200,000, driven by robust fundamentals.
However, not all economists are convinced of a rate cut in September. Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management, emphasized the importance of monitoring Fed officials' responses to market expectations. She suggested that if the officials believe the market is misguided, they might intervene to temper expectations. Meanwhile, Jeff Schmid, president of the Federal Reserve Bank of Kansas City, indicated that the current rate remains suitable given the ongoing economic momentum, business optimism, and persistent inflation above the Fed's target. The July U.S. CPI report showed inflation holding steady at 2.7% year-over-year, unchanged from June and below the forecast of 2.8%.
