Ethereum Hit by Multiple Headwinds…Lowest Level in Two Months

Crypto Now

Fading Expectations for US Rate Cuts

Rising Shutdown Fears Also Weigh

Ethereum fell to its lowest level in about two months. Analysts say investor sentiment has been dampened as expectations for US policy rate cuts have weakened, compounded by renewed concerns over a US government shutdown (temporary suspension of operations). Continued selling by institutional investors is also driving outflows from spot exchange-traded funds (ETFs) that invest in Ethereum.

According to Binance on the 28th, Ethereum briefly dropped to $3,815 on the 25th. After breaking above the $4,000 mark on the 9th of last month, it slid back into the $3,000 range in just over a month. The sharp decline also triggered liquidations of more than $400 million in long (buy) positions in the derivatives market.

Stronger-than-expected US economic growth weighed on the asset. The US Commerce Department said on the 25th that second-quarter gross domestic product (GDP, final) rose 3.8% quarter-on-quarter. That is the highest quarterly reading in about two years. First-quarter growth was -0.6%. The financial market is increasingly leaning toward the view that the US central bank (Fed) will not cut policy rates for the time being.

Growing concerns that a US government shutdown could occur are also cited as a factor pressuring Ethereum. On the 19th, a stopgap funding bill introduced to avert a shutdown failed to pass the Senate. If it is not passed by the 30th, the US government will enter a shutdown.

Institutional selling has also intensified. Grayscale, a digital-asset manager, offloaded $53.8 million worth of Ethereum over the past week alone. In the aftermath, spot Ethereum ETFs also saw sizable outflows. On the 25th, US spot Ethereum ETFs posted net outflows of $251.2 million.

Despite the recent slide, the financial market is maintaining an optimistic outlook on Ethereum’s value. Last month, Standard Chartered (SC) raised its Ethereum price target to $7,500 from $4,000.