Key Takeaways:
The US Federal Reserve has opted to keep its benchmark interest rate on the dollar unchanged at 5.25% – 5.50% following the two-day Federal Open Market Committee (FOMC) meeting on Wednesday. The decision in alignment with Wall Street’s expectations, marked the eight-consecutive meeting without a rate change.
During the press conference after the meeting, Fed chairman Jerome Powell said that a September rate cut “could be on the table”, resulting in stocks soaring to a session high and cryptocurrencies suffering a dip.
Federal Reserve Decides Not To Slash Interest Rate, Stocks Rise While BTC And ETH Suffers
The tech-heavy Nasdaq 100 rose by 3.3% and the S&P 500 climbed 2%. Meanwhile, leading cryptocurrencies Bitcoin (BTC) and Ethereum (ETH) saw their prices decline between 3% and 4% over the past 24 hours. The global cryptocurrency market capitalization also took a hit, dropping 0.71% to $2.39 trillion.
According to Santiment, the Federal Reserve’s decision to maintain current interest rates led to an initial dip in cryptocurrency prices. This is because traders were largely hoping for a rate cut, which has not occurred since March 2020.
However, a rate cut in the future could be a bullish signal for both stock and crypto markets, potentially uplifting them for the rest of the year. Moreover, market analysts say the latest dip will be a short-term event as BTC and ETH, despite being under the grip of the bears, are showing bullish signals.
Considering the anticipation surrounding the Federal Reserve meeting, its impact on cryptocurrencies was limited as the news had already been factored into the prices of the asset class. Historically, decisions from the FOMC meeting have shown minimal major impact on the price of Bitcoin and Ether.
In 2020 and 2021, when the Fed brought interest rates down to zero, BTC, ETH, and other major altcoins soared to record highs, only to reverse paths when the rates began to rise in 2022. Investors have since moved trillions of dollars into low-risk assets like money market funds, treasury securities, and bonds, which have benefited from an average return of 5%.
Ether Price Drops As Net Outflows From Grayscale’s Ethereum ETF Show No Signs of Slowing
While Ether’s price is still up 10% from the days before the US Securities and Exchange Commission (SEC) announced that it would be approving spot Ethereum exchange-traded funds (ETFs), it declined by 3% over the past week following the launch of the investment funds.
One main reason why the ETH price is declining is due to the performance of the legacy Grayscale Ethereum Trust (ETHE). The fund which held roughly $10 billion worth of the cryptocurrency before its conversion into an ETF, has witnessed outflows of more than $1.8 billion in the week since its conversion.
Analysts have pointed to ETHE’s relatively high commission fee of 2.5% as a reason why investors are moving funds out of the ETF, which puts more downward pressure on the price of ETH.
However, most of the money exiting Grayscale’s fund has found its way into ETFs by other issuers like BlackRock, Fidelity, Bitwise, and Franklin Templeton, which charge less in fees. The cumulative net outflows for the entire spot Ether ETF market currently stand at $406.4 million.
Analysts Expect $15 Billion To Flow Into Spot Ether ETFs In 18 Months
According to Tom Dubleavy, a partner at MV Capital, we will continue to see the outflow trend continue in August. In an X post he noted that at $1 billion or so a week in ETH outflows, the market should settle in a new “steady state” for Ethereum by the end of the month.
Interestingly, a similar situation occurred earlier this year after the spot Bitcoin ETFs were released when outflows from the Grayscale Bitcoin Trust (GBTC) led to BTC suffering a parallel drop of about 10% in the first couple of weeks, before rebounding and hitting a new all-time high.
Despite the struggles, crypto market analysts have varying opinions on where ETH’s price could be headed after the outflows from Grayscale’s Ethereum ETF have subsided.
Matt Hougan, chief investment officer at Bitwise, expects $15 billion to flow into the US spot Ether ETFs in their first 18 months of trading. Meanwhile, at the recently concluded Bitcoin 2024 conference, BlackRock’s head of digital assets Robert Mitchnik indicated that large-scale financial institutions may begin soliciting investments into the Ethereum ETFs later this year.
Bitcoin and Ethereum Technical Indicators
The first major resistance for Ether is near the $3,330 level, and if it fails to clear that level, then its price could continue to move downwards. Initial support for ETH on the downside is near $3,250 and the first major support zone sits near $3,230.
Bitcoin’s immediate resistance is noted at $66,852, with its support at $65,000. The cryptocurrency’s Relative Strength Index (RSI) signals oversold conditions, indicating further declines when the price drops below $65,900.
At the time of writing, BTC is trading at $64,381 – down 3.01% in the last 24 hours, while ETH is changing hands at $3,174 – down 4.64%.
Latest news: Bitcoin Slides To $66,000 Following US Government Transfer! Is A Major Price Dip Coming?
