Ethereum plunges 13%, down more than Bitcoin after Fed spooks crypto markets

Ethereum’s native token, ether (eth), tumbled sharply hours after the US Federal Reserve released the minutes of its December meeting, showing it envisions a faster timetable for raising rates of interest in 2022.

The minutes showed that the federal open market committee (fomc) is in favor of raising short-term rates “earlier or at a faster pace than participants had anticipated.” According to the CME group, trading in the interest rate futures market showed a two-thirds chance of the first hike in March.

Reading: Bitcoin ether other drop more than

ether dipped after the minutes were released, falling over 13.50% to as low as $3,300. its drop mirrored similar downward moves in the crypto market, with bitcoin (btc) shedding just over 9% to nearly $42,100.

ETH/USD four-hour price chart. Source: TradingView

Incontestably, ETH/USD returned more losses to its investors than BTC/USD after the Fed’s announcement.

It seems that traders decided to unroll tokens with better long-term profits than bitcoin. For example, ether returns over the last 12 months, even after the fed-led slump, turned out to be around 175%. on the other hand, bitcoin gains were almost 15.75% in the same period.

Performance of top 15 cryptocurrencies. Source: Messari

Similarly, Ether’s top rival, Solana (SOL), also logged more losses than Bitcoin, dipping by more than 13.75% after the Fed’s news. Nonetheless, its 12-month profits came out to be more than 7,500%, signaling further extreme corrections if the crypto market’s bias remains skewed toward bears.

eth/btc hits a key rebound level

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ether also tumbled against bitcoin, based on the performance of a widely traded instrument on eth/btc over the last 24 hours.

The pair fell just over 5% to hit 0.077 btc. In doing so, it also hit a critical support level near 0.078 btc which has recently been instrumental in keeping ether bullish against bitcoin by limiting the former’s downside bias.

Ethereum plunges 13%, down more than Bitcoin after Fed spooks crypto markets

ETH/BTC daily price chart showing its key support level. Source: TradingView

Meanwhile, the 0.078-BTC support also appeared to be the lower trendline of Ether’s descending triangle. Descending triangles are continuation patterns that typically send the price in the direction of its previous trend after a consolidation period.

that increases the potential for ether to remain stronger than bitcoin in the long run, as long as it breaks above the upper trend line of the triangle with convincingly higher volumes.

too early to fear the feds

For months, federal officials clung to the view that higher inflation in the us. uu. It was inspired by supply chain bottlenecks, and Chairman Jerome Powell claimed it would solve itself. but at the last meeting, he showed less conviction toward the so-called “inflation is transitory” narrative.

That’s mainly because ee. the consumer price index hit a nearly 40-year high in November 2021, hitting 6.8% year-over-year. Meanwhile, core consumer prices, which exclude energy and food categories, rose 4.7% from a year earlier; it came in above the Fed’s preferred inflation target of 2%.

“There is a real risk now, I think, that inflation will be more persistent and… the risk that higher inflation will take hold has increased,” Powell said Dec. 12. 15 after the conclusion of the fomc meeting.

Ethereum plunges 13%, down more than Bitcoin after Fed spooks crypto markets

U.S. headline inflation over the years. Source: Bloomberg, Bureau of Labor Statistics

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Madison Faller, a global strategist at JPMorgan Private Bank, told Bloomberg that investors should not fear the Fed, noting that its three planned rate cuts in 2022 would do little in curbing down consumer prices. She said:

As cointelegraph also covered, fears of persistently higher inflation, which, in turn, tends to devalue cash, have led major investors to park their money in the cryptocurrency sector.

for example, thomas peterffy, the billionaire founder of brokerage firm interactive brokers group inc., admitted that he has 2-3% of his net assets in cryptocurrencies in case fiat money “goes away”. to the hell”. Likewise, the founder of Bridgewater Associates, Ray Dalio, revealed last year that his investment portfolio contains Bitcoins.

The anti-inflation outlook promised to offer a respite to ether, which tends to follow bitcoin’s price movements.

Meanwhile, Sean Farrell and Will McEvoy, Global Fundstrat Strategists, said investors should increase their investments in the smart contract sector to take full advantage of the upcoming market recovery.

“Given the current macro environment, leverage within the bitcoin market, and the recent strength seen in the altcoin market, we believe it is appropriate to overweight ethereum and other smart contract platforms,” they said in a note, adding:

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, you should do your own research when making a decision.

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