Ethereum’s native token Ether (ETH) rose to a three-week high, rallying in tandem with the broader cryptocurrency market as well as stocks.
The price of Ethereum is rising to a three-week high
On January 9, ETH price rose by 2.85%, crossing $1,325 for the first time in three weeks, an important level that could pave the way for the token to $1,350 next if the previous price performance continues.
The cryptocurrency market capitalization increased by 2.66%, or $21.18 billion, over the same period.
A slowdown caused by inflation increases the price of Ethereum
Investors are rushing into riskier markets as inflation slows.
Notably, on January 6, the US Labor Department’s Nonfarm Payrolls report showed a slowdown in wage increases, which market observers interpreted as a sign that the Fed’s hawkish policy has succeeded in bringing down inflation.
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Such a scenario could prompt the Fed to slow down the pace of interest rate hikes, which in turn could be bullish for crypto-assets like Ether.
Inflation will continue to fall for the next few months – this will cause the Fed to finally pause and relax and the markets will pick up. Once the Fed starts easing, we will enter the second phase of the inflation saga. It seems that people don’t really understand how sticky inflation is pic.twitter.com/iFKbUWg9QA
– Nate O’Brien (@nateobrienn) January 9, 2023
The market is now awaiting new data on consumer prices in the US on January 12th. The numbers will set the tone for the two-day FOMC meeting that begins on January 31. CME data shows market consensus for a base point price hike in February.
Ethereum Options Traders Bet ETH Will Rise 160%
With macro indicators turning bullish in the short-term for risky markets, Ethereum options traders are becoming confident of a potential price rally in the first quarter of 2023.
Notably, Ethereum’s open bid for contracts expiring March 31 is mostly bullish, with most targets within the $3,500 to $4,000 range, according to data tracked by Glassnode.
The bullish outlook gets an additional boost from Jiang Zhuoer, CEO/Co-Founder of Bitcoin (BTC) mining service B.TOP, who Believe That Ether will permanently break out of its current low range between March and May 2023, noting the deflationary bid rate in recent months.
“Looking at the data for Ethereum, the inflation rate was 3.59% when ETH was in proof of work (POW). Bitcoin inflation rate is 1.72%,” he wrote, adding:
Even after the bear market, with no coin burning activity, the inflation rate for Ethereum is at 0.01%. […] From this data, it can be concluded that the Ethereum bull market will start in a deflationary spiral.”
However, the Fed will need to see a sustained decline in inflation before it halts the wave of rate hikes, warns Edward Park, chief investment officer at Brooks Macdonald in London.
ETH dollars. Bearish market analysis. Since reaching the top in December 2021, the price has been moving in a downward channel so far.
– London Crypto (@SerLondonCrypto) January 9, 2023
If this does not happen, investor sentiment towards risk could cool again, which could cause Ether to rebound below $1,000 in such a scenario, which could form a double bottom.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.