The Ethereum (ETH) price experienced significant fluctuations on Friday following the US Federal Reserve’s recent meeting. Prices dropped to the $3,100 level before swiftly recovering to above $3,400. As a result, the ETH price remained largely flat over the past 24 hours, with a 16.5% decrease from last week’s peak above $4,100.
Impact of the Federal Reserve’s Statement on Market Sentiment
On Wednesday, the Federal Reserve’s updated stance on inflation and interest rates disrupted both traditional financial markets and cryptocurrencies. The Fed raised concerns about persistent inflation and adjusted its projections, now expecting just two rate cuts in 2025 instead of the previously anticipated four. This change rattled markets, including US equities, which had already been due for a correction. The S&P 500, for example, saw its biggest post-Fed drop since March 2020, falling 3%.
Ethereum’s Recovery and Potential for Stabilization
As a risk-sensitive asset, Ethereum, along with other cryptocurrencies, experienced a sharp decline following the Fed’s announcement. However, price movements on Friday suggest that the worst may be over. Ethereum’s price is showing signs of stabilization, potentially setting the stage for a recovery by the end of the year. The formation of a bullish dragonfly doji, a technical pattern typically seen at price bottoms, signals possible upward momentum.
Ethereum also found strong support near its 200-day moving average (200DMA), with signs of aggressive buying from dip buyers. Notably, Donald Trump’s affiliated crypto project, World Liberty Financial, made a significant ETH purchase, adding over $2 million to its holdings.
Adoption and Policy Changes May Propel Ethereum’s Price
Looking ahead, if macroeconomic conditions remain stable, the focus may shift back to favorable long-term trends, such as growing cryptocurrency adoption and the Trump administration’s pro-crypto stance. With expectations of a new crypto “golden era” in 2025, Ethereum could see gradual recovery toward the $4,000 mark by year-end, although a return to all-time highs is unlikely in the short term.
Ethereum’s Long-Term Outlook Despite Recent Setbacks
While Ethereum’s recent price action might cause concern, investors should focus on the broader trend of adoption. Wall Street’s increasing interest in crypto and the potential creation of Bitcoin national reserves lend legitimacy to the industry. Despite concerns over the Fed’s rate cuts, the ongoing bullish tailwinds from adoption may outweigh short-term macroeconomic challenges.
ETH’s cyclical relationship with Bitcoin also offers optimism for the medium-term price outlook. Historically, Bitcoin has led Ethereum in price rallies, breaking new records one to two months ahead of ETH. Given Bitcoin’s breakout in mid-November, Ethereum could experience a price surge in January as it follows Bitcoin’s lead.
Ethereum’s Dominance in the Crypto Space
Although some critics argue that Ethereum’s technology lags behind competitors like Solana or Sui, Ethereum continues to dominate the decentralized finance (DeFi) sector, with about 56% of total value locked (TVL), according to DeFi Llama. Moreover, Ethereum benefits from the backing of institutional giants like BlackRock, further solidifying its position in the market.
Despite recent volatility, Ethereum’s prospects remain strong, with institutional investment continuing to flow into the asset. BlackRock, for instance, has focused on promoting its existing Ethereum and Bitcoin ETFs to a wider investor base, signaling long-term confidence in Ethereum’s potential.
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