Ethereum’s performance has deteriorated since it was removed as an area of resistance. It is bleeding and recorded the second-worst performance of the crypto top 10, according to market capitalization. This includes a 10% decrease in 24 hours. Solana, (SOL), is at the top of the list with a 13% gain.
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The market’s general mood seems to have dropped to an alarming level, however, it is possible for the sentiment to turn around. accordingDaniel Cheung, co-founder at Pangea Fund Management. ETH’s price could succumb to macroeconomic conditions.
Cheung asserts that the market capital of the second crypto is closely related to traditional equities. This includes the Nasdaq 100, which Cheung has correlated via the Invesco QuQQ Exchange Traded Fond (ETF). In that sense, the crypto market has become susceptible to stock price movement making it “a market regime where it is all just one big Macro trade”.
The analysis claims that Ethereum could see a 40% drop from its current levels as the Nasdaq 100 has “a lot of room to fall”. It has not experienced a 30 percent crash and has historically fallen as high as 45%.
Cheung thinks that the potential crash of Ethereum and Nasdaq 100 tech stocks will be caused by poor earnings seasons. This is one of the conditions that could force ETH’s price to break below $1,000 and into $500 for the first time since 2020.
This analysis suggests that traditional markets are misinterpreting the U.S. Federal Reserve. Inflation is at an all-time high of 40 years, according to the Consumer Price Index. The Federal Reserve (Fed) attempts to reduce it by raising interest rates or letting its balance sheets go into the marketplace.
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In the hope of lowering inflation, it is important to decrease consumer demand and lower prices on global markets. Cheung suggests that market participants underestimate the Fed and are therefore not prepared for the possible consequences.
(…) there will likely be more iterations of lower earnings revisions that follow over the coming months especially given this is a market regime that very few investors have experienced This will bring equities lower and crypto to follow with it more downside to come.
According to the analysis, it is possible that the U.S. might already be experiencing an economic crisis. The Fed could use this to increase market pressure, which would have a worse effect on Ethereum and other cryptocurrency.
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With the U.S. Financial Entities publishing a report about GDP growth, this could be verified today. If this report spells economic slowdown, adding more downside pressure and further impacting companies’ earnings season, Cheung claims while adding:
If the GDP print + CPI print + FOMC commentary all play out according to plan – we will likely be at a triple digit $ETH price once again. Investors would still have to navigate the obstacles that lie ahead, as the 2Q22 earnings of companies would continue.