The cryptocurrency market is currently experiencing a downward trend, as Ethereum’s price dropped by approximately 6% on April 30th, reaching its lowest level in over a week at $3,024. This decline in Ethereum’s value is reflective of similar movements across the crypto market, resulting in a 4% decrease in the total market value.
There are several key factors contributing to Ethereum’s fall in price. Firstly, newly launched crypto-linked spot exchange-traded funds (ETFs) in Hong Kong received a lukewarm response, which impacted Ethereum’s performance. On April 30th, six crypto ETFs in Hong Kong underperformed, achieving only $11 million in total trading volume, falling significantly short of the expected $100 million. Out of this total, $8.5 million came from Bitcoin ETFs, while the remaining amount was attributed to Ethereum ETFs.
This performance is in stark contrast to the successful launch of U.S.-based spot Bitcoin ETFs on January 11th, which generated a first-day trading volume of $655 million and have since attracted nearly $12 billion in investor funds. However, recent entries have slowed down, affecting Bitcoin’s upward trend and dragging down other cryptocurrencies like Ethereum that are positively correlated with Bitcoin.
The recent drop in Ethereum’s price can also be attributed to concerns surrounding the Federal Reserve’s stance. Investors are worried that the Federal Reserve may maintain a hawkish outlook at the Federal Open Market Committee meeting on May 1st. According to CME data, expectations for interest rate cuts have been postponed to late 2024, with no more than two cuts anticipated by the end of the year. This adjustment is mainly driven by persistent inflation and the slow recovery of the U.S. economy.
The crypto market has historically seen declines ahead of FOMC meetings, indicating the cautious approach of investors. For instance, the market valuation dropped by over 10% before the March FOMC meeting and around 5% before the January meeting, leading to a decrease in the prices of leading cryptocurrencies like Bitcoin and Ethereum. This demonstrates how investors adjust their positions in anticipation of potential changes in monetary policy.
It is important to note that the information provided in this article should not be considered as investment advice. Investors should be aware of the high volatility and risks associated with cryptocurrencies and conduct their own research before making any investment decisions.