Ether Struggles to Gain Despite Cryptocurrency Market Surge: The Impact of US Economic Data & SEC Decisions
Summary:
Despite a 5.5% increase in the total capitalization of cryptocurrency markets following the release of U.S inflation and retail sales data, Ether failed to capitalize on this trend and underperformed against Bitcoin. The upcoming decision of the U.S. SEC on the application for a spot Ethereum ETF and the inflationary ETH supply due to reduced transaction fees may have contributed to this holding pattern in Ether prices.
A dramatic 5.5% surge in the total capitalization of cryptocurrency markets was reported on May 15th, in the wake of U.S inflation and retail sales statistics. Despite this, Ether (ETH) was unsuccessful in wholly benefiting from this favorable trend, registering a less-than-impressive performance against Bitcoin (BTC), the leading cryptocurrency, by 22% since 2024 began. Furthermore, a 3.4% annual increase in the U.S. Consumer Price Index (CPI) for April was in line with market predictions and resulted in a positive response from the crypto markets. Conversely, April's retail sales data, published on May 15, stayed the same, contradicting the anticipated 0.4% hike, which made the investors uneasy, signaling that the U.S. Federal Reserve might introduce steps to jump-start the economy. Notably, even if the Fed decides to keep interest rates above 5.25% to curb inflation, it may consider purchasing governmental securities or lowering the rate at which banks borrow from it. Such potential signals of continued liquidity can influence economic behaviors. Interestingly, such instances of weaker economic activities are often interpreted as indicators of money being poured into the system, benefiting investments in scarce assets like cryptocurrencies, stocks, gold, etc. Despite the prevailing interest rate, the abundance of circulating money due to these expansionary moves aimed at avoiding recession will likely cause inflation to rise. The speculation also buzzes that Ether's failure to overcome the $3,000 resistance level could be tied to the upcoming U.S. SEC's decision on May 23 regarding VanEck's spot Ethereum ETF application. This ambiguity might be causing investors to delay their investments. A rejection might lead to a temporary market correction despite Ethereum's promising long-term outlook. Eric Balchunas, a senior ETF analyst at Bloomberg, voiced skepticism about the approval of a spot Ethereum ETF, considering SEC's wary stance towards products that could be categorized as securities. This sentiment is mirrored in Ether's derivatives markets. In neutral market conditions, ETH futures contracts usually have an elevated price between 5% and 10% than the regular spot prices, adjusting for the extended settlement period. Yet currently, the ETH futures premium is steady at 9%, implying a neutral sentiment among traders towards the ETF decision. Similarly, an equal demand for buying and selling options is evident in the options market, as both are trading at similar price levels. Additional elements, like ETH becoming inflationary due to lower transaction charges, are potentially keeping Ether prices below $3,000. It's crucial to reiterate that this article doesn't offer investment advice and each investment move carries a risk, necessitating thorough research by the readers.
Published At
5/15/2024 10:33:43 PM
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