Ethereum surged past $4,700 due to expectations that the Federal Reserve will cut interest rates in September.
Cryptocurrency analysts warn that if the Fed does not lower interest rates, the market may face high risks and strong volatility.
MAIN CONTENT
Expectations of the Fed cutting interest rates in September have significantly boosted Ethereum prices.
The market assesses the probability of the Fed lowering interest rates at up to 95.8% according to CME Watch Tool data.
Experts warn of liquidity risks if the Fed does not cut interest rates as anticipated.
Why has the price of Ethereum surged above $4,700 recently?
Ethereum prices are mainly driven by widespread market expectations that the Fed will cut interest rates in September, which is reinforcing positive investment sentiment.
The CME Watch Tool shows the probability of the Fed cutting interest rates in September at around 95.8%, reflecting strong investor confidence. When interest rates are lowered, the opportunity cost of investment decreases, facilitating capital flows into risk assets like Ethereum. This helps push ETH prices above $4,700, attracting demand from both individual and institutional investors.
What are the risks if the Fed does not cut interest rates as expected?
Financial experts warn that if the Fed does not lower interest rates, it could trigger a liquidity crisis, negatively affecting the cryptocurrency market and the overall global financial system.
Pav Hundal—an analyst at Swyftx—emphasizes that the current trend heavily depends on the assumption that the Fed will cut interest rates; if this does not happen, the market is likely to face strong volatility, potentially freezing capital flows. Charles Edwards, founder of Capriole Investments, also mentioned that although he is optimistic about Ethereum's potential, he does not exclude the possibility of liquidity pressure leading to a capital flow freeze.
"The entire current trend depends on the expectation of the Fed cutting interest rates next month; if this does not happen, the market may soon face a liquidity crisis."
Pav Hundal, Swyftx Analyst, August 14, 2023
Will Ethereum maintain its long-term upward trend?
The condition for Ethereum to maintain its upward trend will depend on institutional investor demand remaining stronger than supply in the market, although macro factors may cause short-term volatility.
Charles Edwards observes that institutional demand exceeding supply is a fundamental factor supporting sustainable price growth for Ethereum. However, he also notes that Fed policy risks could alter this balance, creating liquidity pressure that slows the market. Therefore, investors should carefully consider monetary policy signals to make appropriate decisions.
"As long as demand from institutions exceeds supply, I still believe Ethereum will continue its upward trend, although policy risks cannot be ruled out."
Charles Edwards, Founder of Capriole Investments, August 14, 2023
Frequently Asked Questions
What factors are driving the increase in Ethereum prices?
Ethereum prices are primarily driven by expectations that the Fed will cut interest rates in September, reducing capital costs and attracting capital flows into cryptocurrencies.
How is the probability of the Fed cutting interest rates assessed?
According to the CME Watch Tool, the probability of the Fed cutting interest rates in September is assessed at 95.8%, reflecting strong expectations from the market.
What is the main risk if the Fed does not cut interest rates?
The major risk is a liquidity crisis, leading to a freeze in capital flows and strong volatility in the cryptocurrency market.
Will Ethereum continue to rise in the long term?
Ethereum has a long-term growth outlook if institutional demand exceeds supply, although it is necessary to monitor policy risks from the Fed.
How can investors cope with volatility caused by Fed policy?
Investors should closely monitor policy information, manage risks, and maintain a diversified portfolio to mitigate negative impacts.
Source: https://tintucbitcoin.com/ethereum-tang-gia-nho-ky-vong-ha-lai/
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