Ether Price Vulnerable If Fed Holds Rates Steady: Analysis

Ether's Price Surge Relies on Fed Rate Cut, Analysts Caution

Ether's recent surge past $4,700 is largely fueled by market expectations of a U.S. Federal Reserve rate cut in September. However, crypto analysts are warning that this rally could be fragile if the Fed doesn't deliver.

Swyftx lead analyst Pav Hundal told Cointelegraph that the market's current trajectory is heavily predicated on the anticipated rate cut. Ether (ETH) is trading just 2.80% below its 2021 all-time high, according to CoinMarketCap data.

Market sentiment indicates a 95.8% probability of a rate cut in September, according to the CME FedWatch Tool.

"Priced for Perfection"

"It looks like we’re priced for perfection, and that’s always when you need to be most careful," Hundal cautioned, highlighting the substantial Ether ETF inflows and consistent funding rates.

Spot Ether ETFs saw record net inflows of $1.01 billion on Monday. Over the past week, Ether has jumped 30%.

Bullish Outlook with Caveats

Capriole Investments founder Charles Edwards remains bullish on Ether, anticipating further price increases. However, he acknowledges the potential impact of an unexpected shift in Fed policy.

"What if the Fed, what if something happens, inflation goes up, or, you know, some unknown changes, and they decide not to cut or this, you know, or there’s a major war breakout, again."

Edwards suggests that such events could "cause liquidity to get scared where capital just kind of freezes up and flows stop."

Despite these risks, Edwards maintains a bullish stance as long as institutional demand continues to outpace the supply of both Bitcoin (BTC) and Ether. He believes that Ether could "probably quite easily double" if Bitcoin reaches between $150,000 and $200,000.

"It can definitely see significant appreciation, especially given the backdrop of strong fundamentals," he added.

Economists Doubt Rate Cut

While market participants largely expect a September rate cut, not all economists share this conviction.

Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management, stated that “The biggest thing to watch now is … are [Fed officials] going to push back on market expectations.”

“If they think the market is wrong, they will go out there, because they’ve got a job to do to talk down the market,” she said.

Jeff Schmid, president of the Federal Reserve Bank of Kansas City, indicated that the current interest rate level is appropriate. “With the economy still showing momentum, growing business optimism, and inflation still stuck above our objective, retaining a modestly restrictive monetary policy stance remains appropriate for the time being,” Schmid said.

July's US CPI data showed inflation at 2.7% year-over-year, holding steady from June and falling short of the anticipated 2.8%.