Ethereum price remained in a tight range on Monday morning, mirroring other cryptocurrencies like Bitcoin, Solana, and Ripple. ETH was trading at $2,930, where it has been at in the past few days. This price is significantly below the year-to-day high of $4,097.
Lagging US equities
Ethereum and other cryptocurrencies are underperforming popular US Exchange Traded Funds (ETFs). The closely watched iShares Core Dividend Growth ETF (DGRO) has soared to $57.7, its highest swing since April 1st. It is nearing its all-time high of $58.20. It has surged by almost 38% from its lowest point in 2022.
The same is happening to other popular US stock ETFs like the SPDR S&P 500 (SPY) and Invesco QQQ (QQQ), which have risen in the past three weeks and are nearing their all-time highs.
The divergence between Ethereum and US stock ETFs has happened for several reasons. First, US companies have published strong financial results. Data by FactSet shows that about 92% of all S&P 500 constituents have published their Q1 earnings. These firms had a blended earnings growth of 5.4%, the highest figure since Q2’22.
Second, there are signs that the Federal Reserve will deliver rate cuts earlier than expected. Recent economic numbers showed that the economy is slowing. It expanded by just 1.6% in Q1 after growing by about 3.4% in Q4. Additional data revealed that consumer confidence tumbled in April while the manufacturing and services PMIs dropped below 50.
In the financial market, weak economic numbers tend to be good news because of their impact on the Fed. Now, analysts expect that the Fed will deliver two interest rate cuts this year, down from the previous estimate of 1.
In a statement last week, Tom Lee, the founder of Fundstrat, said that he expects inflation will continue falling as housing and insurance prices retreat. Therefore, this week’s inflation report will provide more information about the trends.
Lower rate cuts will have a positive impact on stocks because investors have packed over $6 trillion in money market funds (MMF). As a result, if rates start to fall, there is a possibility that these investors will move back to stocks.
Further, stock ETFs like QQQ, SPY, and DGRO have continued to do well as volatility in the market has dropped. The closely watched VIX index has tumbled in the past eight straight days. It has crashed by over 40% from its highest point this year.
Ethereum challenges remain
On the other hand, there are concerns about the cryptocurrency industry as it lacks a clear catalyst. The biggest catalysts, like the approval of 11 spot Bitcoin ETFs and the recent Bitcoin halving have already happened.
At the same time, there are concerns about the approval of a spot Ethereum ETF by the Securities and Exchange Commission. The SEC will likely deny the recent applications because it sees Ethereum as an unregistered security.
Further, one of the top use cases of Ethereum and other blockchains has imploded. There are signs that the NFT industry has died. Data compiled by CryptoSlam shows that Ethereum handled just $5.0 million worth of NFTs in the past 24 hours. At its peak, the network used to handle over $50 million worth of tokens.
Ethereum is also facing stiff competition from other blockchains like Solana, Avalanche, TonCoin, and Base.
Ethereum price prediction
On the positive side, there are chances that the Ethereum price will bounce back. As shown below, the chart shows that the ETH price has formed a falling wedge pattern, which is one of the most bearish signs.That wedge is nearing the confluence level, meaning that the price could make a bullish breakout in the coming weeks.
