Ethereum (ETH), the leading altcoin, continues to see its price fluctuate following a broader market downturn.
Based on the Federal Reserve’s Quantitative Easing (QE) expectations, analysts forecast that ETH prices may soon see a quick recovery.
Ethereum Price and Quantitative Easing Outlook
In the past, many have pointed to Ethereum’s sensitivity to Federal Reserve policies, particularly around QE.
Minutes from the December FOMC meeting indicated that some Federal Reserve officials plan to discuss “slowing the pace” of securities runoffs on its balance sheet.
It is important to note that the Fed balance sheet affects market sentiment and liquidity and how cash investors may want to process conflicting signals.
Meanwhile, the Federal Reserve struggles with how far it could go with Quantitative Tightening (QT) without causing undue money market volatility.
During quantitative easing, the Fed would buy back securities like the U.S. Treasury, and the corresponding amount of currency would flow into the market.
Once more money is printed and injected into circulation, inflation rises, making ordinary people lose their savings and pushing them to invest in cryptocurrencies like Ethereum.
ETH Price Expectations Per QE Correlation
Top market analyst Benjamin Cowen has further highlighted Ethereum’s correlation with the Fed’s QE.
Cowen noted that Ethereum’s current trend resembles a 2019 cycle in which a wedge pattern was formed. According to Cowen, ETH price is still replicating the previous cycle via the lens of monetary policy.
ETH remained in a wedge during the 2019 cycle, which coincided with the Fed’s quantitative tightening.
Soon after, the asset fell below the wedge following a fakeout above it. After ETH fell below its wedge in 2019, the Fed ended QT shortly after.
This led to a decline in the ETH/BTC pair, while ETH/USD saw a rally. However, this rally only lasted a while as the pair went deeper into the regression band a few months later.
Cowen emphasized that the current cycle is playing out a similar script. The only thing that Cowen thinks is different is how much longer QT will last.
He said ETH price is currently breaking down into its regression band from the wedge it formed during QT.
He also pointed out that there is a good chance that the Fed will terminate QT in the coming months.
Thus, the movement of crypto can shed light on the consumer’s general health and, thus, the Fed’s reaction function.
Last month, Cowen noted that the Fed’s failure to announce no immediate QE plan could trigger a downturn for Ethereum.
ETH Price and Troubled Ecosystem
ETH’s price is currently at $2,173, up 2.39% in the last 24 hours.
In tandem, the daily trading volume surged by 31.5% to $37.7 Billion, suggesting increased investor activity. When the market picks up steam, this could eventually push the coin higher.
Analysts noted that ETH price is in an accumulation phase and forecasted the asset to hit $7,000 soon.
They claim Ethereum’s price movements during past accumulation phases are identical to upcoming significant breakouts.
Meanwhile, the latest decline in Ethereum’s price comes on the heels of challenges in the ecosystem.
Notably, the long-awaited Pectra upgrade was activated on Holesky, but the Ethereum testnet failed to reach finality shortly after its activation.
The issue stemmed from execution clients who had not correctly integrated the deposit contract address.
This created a critical error, leading to network instability. Core Developers recently released new updates on Ethereum Pectra to combat the issue.
