Regarding the impact of the Federal Reserve's interest rate cuts on Ethereum (ETH), I would like to share my thoughts considering the current market conditions. Overall, **the market generally expects that the interest rate cuts may have been partially priced in for the short term, but are still favorable for Ethereum in the medium to long term**. However, Ethereum's performance, in addition to the focus on macro monetary policy, also depends on its own ecosystem development and its relative strength against Bitcoin (ETH/BTC exchange rate), which are also key.

Highly sensitive to interest rate cuts, usually considered a risk asset, benefiting from increased liquidity | Also benefits, but is more viewed as 'digital gold' and a store of value |

| ETF and Institutional Channels | Spot ETFs have been listed, but the scale and speed of fund inflow are yet to be observed | Spot ETFs are more mature, with significant fund inflow |

| Own Ecology and Demand | Relies on the development of applications in DeFi, NFT, etc., and network activity | More as a store of value and payment method |

| Technological Upgrades and Deflation | The deflation mechanism (EIP-1559 burning) and ongoing technological upgrades (such as the Dencun upgrade) are potential positives | Fixed supply, upgrades revolve more around layers and scalability |

| Relative Valuation (ETH/BTC) | Recent ratio is relatively low (around 0.039), with some analysts suggesting it may be undervalued | Dominant position is solid, market cap share exceeds 50% |

| Short-term Volatility | May be larger, significantly influenced by market sentiment and speculative funds | Relatively low volatility (by cryptocurrency standards) |

🧐 Understand the ETH/BTC exchange rate

This ratio *measures how many BTC one ETH is worth**.

*Increase**: Indicates ETH's performance is **stronger than** BTC.

*Decrease**: Indicates ETH's performance is **weaker than** BTC.

Currently, this ratio hovers around *0.039**, far below the 2017 peak of 0.14. Some analyses even suggest that according to indicators like MVRV (market cap to realized value ratio), ETH may be in an undervalued region relative to BTC.

📉 Short-term: Beware of volatility after 'good news has been fully priced in'

Although rate cut expectations support market sentiment, it is essential to note that **the market may have already priced in this benefit**. If the rate cut magnitude meets expectations (25 basis points) and subsequent guidance has no more surprises, Ethereum's price may also experience a short-term correction. Historical experience shows that during the Federal Reserve's rate cut cycle, the market sometimes experiences a 'rally during expectation speculation, followed by a decline after policy implementation.'

🚀 Medium to long term: Multiple factors support a bullish logic

From a medium to long-term perspective, if the Federal Reserve begins a rate cut cycle, the outlook for Ethereum remains optimistic, mainly supported by the following points:

1. Improvement in Liquidity Environment: Rate cuts generally mean more abundant market liquidity, and some funds may flow into risk assets like cryptocurrencies seeking higher returns. As one of the core assets, Ethereum is expected to benefit.

2. Deepening Institutional Adoption: The launch and promotion of Ethereum spot ETFs by large asset management companies like BlackRock and Fidelity provide traditional institutional funds with a convenient allocation tool, which may bring new buying power.

3. Regulatory Attitude Becoming Clear: After the change of leadership at the US SEC, the regulatory tone towards crypto assets seems to shift from 'strict enforcement' to 'encouraging innovation and building a clear framework.' A clearer regulatory environment helps reduce uncertainty and boost market confidence.

4. Improvements in Ethereum's own fundamentals:

*Technological Upgrades**: The Dencun upgrade at the beginning of 2024 significantly enhances the network's scalability and energy efficiency, reducing transaction costs.

*Deflation Mechanism**: The fee-burning mechanism introduced by EIP-1559 can effectively reduce the ETH supply when network activity is high.

*Ecological Prosperity**: The development of applications such as DeFi, NFT, and blockchain games continues to attract users and developers, driving network value growth.

⚠️ Risks to be aware of

1. Changes in Market Sentiment: The cryptocurrency market is highly volatile and easily influenced by market sentiment and speculative funds. If the macro environment or risk appetite changes, funds may quickly flow out.

2. BTC's Dominance: Bitcoin holds a dominant position in the cryptocurrency market (with a market cap share exceeding 50%). If Bitcoin's price undergoes a significant adjustment, it will be difficult for Ethereum to remain unscathed.

3. Regulatory Dynamics: Although the overall regulatory environment may improve, sudden adverse regulatory policies may still impact the market.

💡 To summarize

For *short-term traders**: It is essential to closely monitor the specific outcomes of the Federal Reserve's interest rate meetings (rate cut magnitude, dot plot, Powell's tone) and their impact on market sentiment, staying alert to the trend of 'buy the expectation, sell the fact.'

For *medium to long term investors**: The liquidity easing expectations from the Federal Reserve's rate cuts, Ethereum's ongoing technological upgrades and ecological development, as well as deepening institutional adoption, are all positive supporting factors. More attention can be given to these long-term trends, but risk management still needs to be noted.

> 💡 Please note: The above analysis is based solely on current public information and does not constitute any investment advice. The cryptocurrency market is highly volatile, and investment should be approached with caution. Please be sure to conduct independent research and judgment before making any decisions.