Ethereum Drops 6% Amid Fed's Quantitative Tightening

Ethereum's price has recently faced a bearish trend, retreating from its peak of $1,687 to trade below $1,580. This downturn has left bullish investors in a precarious position, as they must decide whether to push through key resistance levels to regain momentum or brace for a potential decline towards the $1,500 support zone. The current market sentiment echoes a similar pattern from 2019, where Ethereum's growth was slower due to macroeconomic pressures.

According to crypto analyst Benjamin Cowen, the extended period of quantitative tightening (QT) by the U.S. Federal Reserve is a significant factor in Ethereum's underperformance. QT involves the Fed reducing its balance sheet to tighten the money supply, creating a challenging environment for risk assets like Ethereum. Unlike the previous cycle, where QT ended before Bitcoin’s halving, this time it has persisted into the post-halving year, contributing to the sluggish growth of Ethereum.

Cowen suggests that the Fed might end QT by mid-2025, as indicated by a recent Federal Open Market Committee (FOMC) summary. If this timeline holds, Ethereum could regain traction once liquidity returns to the market. Until then, Ethereum may continue to lag behind more speculative or faster-moving altcoins. At the time of Cowen’s analysis, Ethereum was trading around $1,652, up 12% in the last 24 hours, but still struggling to outperform the broader crypto market. The mixed technical scenario, along with bearish trend lines and key resistances, coupled with macroeconomic drag, is making it harder for Ethereum to lead the current cycle.

Cowen believes that Ethereum’s slow momentum is not a failure of the asset itself but a symptom of extended economic tightening. If QT ends as projected, Ethereum may finally have the breathing room to run. Until then, it’s a game of patience for investors. The current economic environment, marked by persistent inflation and weakening economic confidence, has added to the uncertainty surrounding Ethereum's price movements. These factors collectively contribute to the bearish sentiment in the Ethereum market, as investors remain cautious amidst the ongoing economic uncertainties.