Ethereum Price Slumps in the Face of Inflation Data and Fed Uncertainties

Ethereum price has been in a steep decline over the past few days amid a dull market. The largest altcoin by market cap has crashed by 14% in the month to date and nearly 3% in the past week. At the time of writing, Ethereum price was trading 1.45% lower at $1,593.45. The asset’s total market cap has dipped by nearly 2% over the last day, while the total volume of Ether traded over the same period jumped by more than 116%.

Economic Outlook

The crypto market started the week in the red, adding to the previous week’s losses amid global economic concerns. Bitcoin, the premier cryptocurrency, has also been on a decline for the past few days, weakening the overall crypto market sentiment. Major altcoins, including BNB, XRP, Dogecoin, Cardano, and Solana, have also inched lower in tandem with the general market movement.

The Crypto Fear & Greed Index, which measures the crypto sentiment by market participants, has declined to a fear level of 35, slightly lower compared to last week’s Fear level of 37. This indicates a decline in risk appetite by investors, which could prompt an increase in selling pressure. The global crypto market cap has decreased by more than 1% over the last day to $1.02 trillion, its lowest level since June.

Investors are bracing themselves for the release of inflation data for August in the week ahead, with the Consumer Price Index (CPI) and Producer Price Index (PPI) slated for Wednesday and Thursday, respectively. The inflation figures will guide the US Federal Reserve on the next monetary policy move.

Several central bank officials have indicated that economic data will be crucial in the Fed’s interest rate decisions. A string of stronger-than-expected economic data released last week renewed worries that the central bank could raise rates further than expected. According to the CME FedWatch Tool, markets are pricing in a 93% chance of a pause in the Fed’s interest rate hike campaign in its September meeting. Notably, traders are pricing in a 4 in 10 chance of a hike in November.

Investors are also closely watching the European Central Bank’s interest rate decision slated for Thursday. Markets are pricing in a 40% chance of a 0.25% hike to 4.00% by the central bank. An environment of higher interest rates tends to be bearish for risk assets, particularly cryptocurrencies.

Ethereum Price Technical Analysis

Ethereum price has been hovering around its lowest level since March over the past few hours amid a bearish market. The digital asset remains below the 25-day and 50-day exponential moving averages, as well as the 20-day and 50-day simple moving averages, as seen on the 4-hour chart. Its Relative Strength Index (RSI) has inched lower to the oversold region, indicating an increase in selling pressure.

Therefore, I expect the Ethereum price to continue falling in the short term as economic concerns continue weighing on the prices. A move below the immediate support level of $1,565 might pave the way for further losses. On the flip side, a breakout above the 50-day EMA at $1,630 could prompt a fresh upside, invalidating my bearish thesis.

ETH Price Chart