Ethereum price hit its lowest level since mid-July earlier on Monday ahead of the Fed interest rate decision set for release on Wednesday. Risk assets remain under pressure as macroeconomics remain the key driver.
What’s driving the market?
Last week’s highly anticipated event – the Merge – was a success. Investors were concerned that a hitch in upgrading the Ethereum blockchain from the proof of work to proof of stake model would have impacted the broader crypto market. The smooth transition offered a sigh of relief to a market that has been under pressure in recent months.
Even so, the upgrade’s positive results did not do much to pause the persistent bearish trend. In fact, earlier on Monday, ethereum price dropped to its lowest level since mid-July at $1,281.68. The main reason behind the persistent downtrend: the macroeconomic environment.
In a typical bullish market, the Merge may have boosted ETH/USD back above $2,000; a level that has been a crucial resistance level for the altcoin since mid-May. Nonetheless, investors’ focus was on something different – inflation and the Fed interest rate decision.
Fed’s policy decision
On Wednesday, the US central bank is expected to approve the third super-sized rate hike of 75 basis points in a row. The Bank of England, Sweden’s Swiss National Bank, and Norway’s Norges Bank are also set to increase interest rates during the policy meetings scheduled in the course of the week.
Cryptocurrencies and risk assets in general have been under pressure from the environment of high interest rates. For instance, after starting the year at $3,901.60, ethereum price has since dropped by close to 65%. During the same period, the leading crypto – Bitcoin – has declined by about 60%.
The latest US CPI figures indicated that inflation in the country is yet to peak. Subsequently, the Fed may continue with its aggressive policy tightening in coming months. From that perspective, ethereum price may be yet to find its short term bottom.