Ethereum (ETH) has been on a roll lately, as its price has been hovering around its highest level in seven months. The cryptocurrency has witnessed a boost in the market, with an increase of 49% in year-to-date price and a growth of 5% in the past week. The total volume of the altcoin traded has also increased by more than 6%, although the total market cap has suffered a marginal decline of 3% over the last day. So what’s causing this price surge, and what could be the implications for the future of this digital asset?
One reason for the recent success of Ethereum, like most cryptocurrencies, is the support it received from the recent fiasco in the banking sector. The vulnerability in the banking industry has led investors to shift their focus to other assets such as cryptocurrencies, which led to an increase in liquidity in the global crypto market. As a result, not only Ethereum, but also other cryptocurrencies like Bitcoin have witnessed a price surge, with the latter hitting its highest level in nine months, while Ethereum has jumped to a seven-month high.
However, just as the crypto market was celebrating this increase in price, the Federal Open Market Committee (FOMC) announced a 25-basis point hike in the federal funds to 5%. This led to the global crypto market going in the red, as investors digested the news. The US Federal Reserve has stated that it remains highly attentive to inflation risks as it seeks to achieve an inflation rate of 2% in the long run. The Committee has also announced its anticipation of additional policy firming to help in attaining a stance of monetary policy to aid in achieving the 2% target.
According to the Fed’s median forecast, there is likely to be one more interest rate hike in 2023 before ending its inflation fight, as it has kept its terminal rate unchanged in the target range of 5%-5.25%. However, this decision has affected the Ethereum price, causing it to drop by 4.35% to $1,722.92 at press time, after it had hit an intraday high of $1,819.98 before pulling back. Even so, Ethereum has continued to trade above the 25-day and 50-day moving averages, and is also trading above the 50-day and 200-day exponential moving averages.
Despite this, the Relative Strength Index (RSI) has inched lower to 55, hinting at a decline in buying pressure. The Moving Average Convergence Divergence (MACD) indicator also shows a decline in bullish momentum. Therefore, it is likely that the Ethereum price will face a short-lived decline in the short term as bears eye the next logical support levels at $1,685 and $1,635 along the 25-day and 50-day MA. However, a move past the resistance level at $1,805.40 will invalidate the cautiously bearish thesis.
Nonetheless, Ethereum has been performing remarkably well in recent times, with the growth rate in year-to-date price surpassing that of Bitcoin. Also, with the introduction of Ethereum 2.0, the network aims to become more sustainable, secure, and efficient. The ETH 2.0 version uses a unique proof-of-stake algorithm that has encryption schemes that make it more efficient than the current proof-of-work system. This could be a great step forward for the Ethereum ecosystem, as it could position it as the leading blockchain network, with increased scalability and efficiency.
In conclusion, the recent surge in Ethereum price can be attributed to various factors, including the support it has received due to shortcomings in the banking sector, and the launch of the ETH 2.0 version. However, it remains to be seen whether the short-term decline in price caused by the FOMC’s decision will lead to a long-term impact on the asset. Nonetheless, the future of Ethereum looks bright, with its unique features and growing popularity making it an attractive investment option in the world of digital assets.