- Ethereum is attempting recovery after the Fed reduced rates by 50 basis points.
- ETH holders are displaying mixed actions following its weak performance against Bitcoin.
- Ethereum could break above the $2,395 resistance level.
Ethereum (ETH) is trading above $2,330 on Wednesday as the market is recovering following the Federal Reserve’s (Fed) decision to cut interest rates by 50 basis points. Meanwhile, Ethereum exchange-traded funds (ETF) recorded $15.1 million in outflows.
Ethereum attempts to stage recovery following Fed rate cut
Ethereum and the general crypto market are seeing buying momentum after the Fed reduced interest rates by 50-basis-points to 4.75% – 5% on Wednesday. The move marks the first rate cut since March 2020, when the agency slashed interest rates to 0%.
ETH may see a recovery in the coming weeks as expectations are that investors may begin to step into the market again with heightened buying momentum following the rate cut. Additionally, Q4 has historically been the best-performing season for the crypto market. Hence, the coming months could prove crucial for Ethereum.
Meanwhile, following the ETH/BTC plunge to a low last seen in April 2021, Ethereum holder’s activity has remained fairly quiet, with a slightly diverging strategy among the different cohorts, per CryptoQuant’s data.
Large holders with supply above 100K have been largely inactive, holding onto their tokens — potentially across staking and DeFi yield-bearing protocols. Mid-tier holders (10K – 100K) are slightly bullish, accumulating at a slow pace. However, small holders (100 – 1K) have been shedding their holdings steadily since the beginning of the year, with August and September experiencing steeper selling pressure than in previous months.
ETH Accumulation
On the other hand, US spot Ethereum ETFs posted net outflows of $15.1 million on September 17, with Grayscale’s ETHE shedding $17.9 million and its Ethereum Mini Trust seeing just $2.8 million worth of inflows.
Ethereum could rally to $2,817 if it closes above key resistance
Ethereum is trading around $2,330 on Wednesday after seeing a rejection near $2,395 on Tuesday. In the past 24 hours, ETH has seen over $22 million in liquidations, with long and short liquidations accounting for $17.69 million and $5.19 million, respectively.
Ethereum is trading within a key rectangle channel with resistance and support levels at $2,395 and $2,207, respectively. A descending trendline extending from May 27 and the 50-day and 200-day Simple Moving Averages (SMAs) also stand as potential resistance.
ETH/USDT 4-hour chart
ETH’s next move could be determined by the Fed’s decision to cut rates by 50 basis points. The move could see ETH break the $2,395 resistance and rally toward $2,817. If ETH fails to see a rejection around $2,817, the next target is $3,237.
On the downside, ETH could bounce around the $2,207 support level. This level has established itself as critical support, considering it is closest to ETH’s highest demand zone, where investors purchased 54.18 million ETH tokens. Hence, buyers may step in to defend their coins from falling into losses.
ETH Global In/Out of the Money
If the support doesn’t hold, ETH could decline toward $2,111. A daily candlestick close below this level will invalidate the thesis and trigger significant losses.
Ethereum development FAQs
After the Merge, the Ethereum community is looking at the Sharding upgrade next, which has been slated for sometime later in the year. The development can be summarized in four words, “scalability through more efficient data storage.” The software update will increase the capacity of the blockchain, widening the amount of data that can be stored or accessed. At the same time, all services running atop the Ethereum blockchain will enjoy significantly reduced transaction fees.
A fork is the splitting of a blockchain after developers agree and proceed to implement upgrades. The decision comes after these developers reach a consensus for a software upgrade. The ensuing part will see one part continue with the status as is, while the other one will proceed with new features combined with the former ones. A hard fork basically entails permanent divergence of a new side chain from the original one, while a soft fork is doing the same, only difference being that it is temporary.
EIP-4844 is an improvement proposal for the Ethereum network. The upgrade promises reduced gas fees, which is a valuable offering considering the high transaction cost that continues to daunt crypto players. It has been a long-standing concern for the Ethereum network. The proposal is also referred to as “proto-Danksharding,” with an unmatched ability to increase the speed of transactions on the Ethereum blockchain. At the same time, it helps to reduce the transaction cost as everything becomes decentralized.
Gas token is a new, innovative Ethereum contract where users can tokenize gas on the Ethereum network. This means they can store gas when it is cheap and start to deploy the gas once the market has shifted to the north. The use of Gas token helps to subsidize high gas prices on transactions, meaning investors can do everything from arbitraging decentralized exchanges to buying into initial coin offerings (ICOs) early.
