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Ethereum faces a turbulent market following the Fed’s recent rate cut, with price fluctuations leading to increased bearish sentiment.
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The sudden drop in Ethereum’s value to $3,624 indicates a potential shift in market dynamics, with user engagement metrics declining significantly.
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According to industry analysts, Ethereum’s price-Daily Active Addresses divergence is at a concerning -98.28%, reflecting a steep decline in user interaction.
Ethereum’s price outlook dims as it drops to $3,624 following a Fed rate cut that disappointed traders, signaling potential future declines.
Fed Rate Cut Leaves Ethereum Traders Disappointed
The recent announcement from Federal Reserve Chair Jerome Powell regarding a 25 basis point (bps) interest rate cut did not produce the expected bullish rally for Ethereum (ETH). Instead, the cryptocurrency’s value tumbled by 4.50%, falling from $3,890 to a low of $3,624. This sudden shift has left investors questioning the potential for a price recovery as momentum shifts toward the bearish side.
Previous rates cut cycles had stimulated positive reactions in the crypto market; however, this time, Ethereum’s performance diverged significantly. On-chain analytics suggest that the attempted price rebound may not hold, raising red flags about the state of investor sentiment.
The price-Daily Active Addresses (DAA) divergence—which measures user engagement against price trends—has turned negative, indicating a worrying lack of participation. Positive DAA typically correlates with bullish price movements, while negative indicates waning interest, which could foreshadow further price declines.
Source: Santiment
The negative DAA metric now stands at -98.28%, emphasizing falling user participation. If this trajectory continues, Ethereum may encounter deeper price challenges in the future. In addition to this, the Coinbase Premium Gap suggests a shift in market dynamics as price discrepancies arise between different platforms.
This metric, which captures the price disparity between the Coinbase ETH/USD and Binance pairings, provides insight into buying habits among U.S. investors. A greater premium on Coinbase often indicates bullish activity, but recent patterns suggest a decline.
Source: CryptoQuant
A premium gap of -1.96 has emerged, further illustrating declining demand for Ethereum among U.S. investors post-Fed rate implications. When prices on exchanges like Coinbase lag behind those on Binance, it indicates weaker demand or increased selling pressure.
Technical Analysis: The Emergence of a Bearish Head-and-Shoulders Pattern
Alongside macroeconomic influences, Ethereum’s technical indicators have also turned bearish. The emergence of a head-and-shoulders pattern on Ethereum’s 4-hour chart suggests a potential trend reversal. This classic formation is characterized by an initial price rise (left shoulder), a peak (head), and a subsequent decline (right shoulder). A break below the neckline traditionally indicates a shift from bullish to bearish trends.
As the price has breached this crucial neckline with diminishing trading volumes, there’s increasing concern regarding the reliability of this formation. A lack of significant volume during a downward breakout might embolden traders to adopt bearish stances.
Source: TradingView
If the current dynamics persist, a downward target of $3,501 seems plausible. However, if trading volume increases and buying interest strengthens, it could negate bearish predictions, offering the potential for a recovery phase where Ethereum might rally toward the $4,500 mark.
Conclusion
The recent Fed rate cut has left Ethereum in a precarious situation, as bearish signals emerge from technical patterns and user engagement metrics. With critical on-chain analytics reflecting significant declines in participation, investors must tread carefully. A recovery is conceivable, but it hinges significantly on increased buying support and the reversal of current bearish trends. Monitoring patterns closely will be essential for understanding Ethereum’s next moves.
