Ethereum price plunged on Wednesday as rumors of a potential Fed interest rate hike curb the asset’s gains. At the time of writing, the altcoin had plunged 6.14% to $1,973.26. Ethereum’s total market cap has dropped by more than 5% over the last day to $236 billion, while the total volume of the coin traded jumped by nearly 52%.
The global crypto market was in the red on Wednesday as markets price in an 86% chance of the Federal Reserve hiking interest rates. The largest coins, Bitcoin and Ether, led the losses in the market, lowering the overall sentiment in the crypto market. Bitcoin price fell by more than 3%, changing hands at $29,000.
Ethereum price dropped sharply below the important level of $2,000, following a 12% rally over last week that pushed it to its highest since August 2022. The drop in crypto prices comes in the wake of the uncertainty around the outlook of the Fed’s monetary policy meeting later in May and a stronger dollar.
Atlanta Fed President Raphael Bostic said that he anticipates a 25-basis point interest rate hike in May and then a hold. St Louis Federal Reserve President James Bullard also said that he favors a higher terminal rate of between 5.50% and 5.75%. In Europe, European Central Bank officials have become jittery about inflation and suggested further interest rate hikes.
Markets were brooding on the latest UK inflation data earlier on Wednesday, which showed that consumer prices rose 10.1% over the 12 months to March, down from 10.4% in February but ahead of consensus estimates of a 9.8% increase. This has fueled expectations that the Bank of England (BoE) could further hike its interest rates in its next monetary policy meeting.
The US dollar strengthened on fears of a looming interest rate hike by the Federal Reserve. A strengthening dollar could hurt risk assets such as cryptocurrencies, as many investors tend to shift to traditional financial institutions. US Treasury yields also ticked higher on Wednesday, with the yield on the 10-year Treasury inching higher to 3.606% and the 2-year Treasury rising to 4.268%.
Ethereum price wiped gains from its previous trading session, dropping below the important $2,000 level. Ethereum continues to trade above the 50-day and 100-day moving averages, as well as the 50-day and 200-day exponential moving averages. Its Relative Strength Index (RSI) has declined sharply to the neutral zone.
As such, I expect the Ethereum price to continue finding support above the $1,900 level in the short term. A drop below the level will have bears eyeing the next logical support level at $1,805.40. However, a breach of the $2,000 level might push the ETH price to its 10-month high of $2,150.