Ethereum has been facing a volatile market following the Fed’s latest rate cut, with price fluctuations leading to increasing bearish expectations among investors.
The sudden drop in Ethereum’s price to $3,624 indicates a significant change in market dynamics. At the same time, a significant drop in user engagement metrics is observed.
According to industry analysts, the gap between Ethereum’s price and Daily Active Addresses (DAA) has reached an alarming level, reaching -98.28%, reflecting a significant decrease in user engagement.
Fed Rate Cut Disappoints Ethereum Traders
Federal Reserve Chairman Jerome Powell’s announcement of a 25 basis point interest rate cut did not trigger the expected bull rally for Ethereum (ETH). On the contrary, Ethereum’s value fell by 4.5% from $3,890 to $3,624. This sudden change led investors to question the potential for a price recovery, and it was observed that the market momentum began to shift to the downside.
While past rate cuts have generally received positive reactions from the crypto market, Ethereum’s performance has taken a different course this time around, with on-chain analysis suggesting that a price rebound may not be sustainable, raising concerns about investor sentiment.
The difference between price and Daily Active Addresses (DAA), or the correlation between user engagement and price action, is currently negative, indicating a significant decrease in engagement. While positive DAA is usually associated with a bull market, negative DAA indicates a bearish trend and weakening interest. The current negative DAA value is -98.28%, indicating that Ethereum could face deeper price declines in the future. Coinbase Premium Gaps metrics also point to a change in market dynamics.
The price gap between Coinbase and Binance reflects the buying habits of US investors. A higher premium on Coinbase usually indicates bullish moves, while recent patterns suggest a decline. A premium gap of -1.96 suggests that demand for Ethereum is decreasing among US investors following the Fed’s interest rate decision. Prices lagging behind those on Binance on exchanges like Coinbase suggest either weakening demand or increasing selling pressure.
Technical Analysis: Head and Shoulders Pattern Signals Downtrend
In addition to macroeconomic influences, Ethereum’s technical indicators are also in a bearish trend. A head and shoulders pattern is evident on Ethereum’s 4-hour chart, indicating a possible trend reversal. This classic pattern involves an initial price increase (left shoulder), followed by a peak (head), and then a decline (right shoulder). A break below the neckline usually signals a transition from a bullish to a bearish trend.
The price has broken through this critical neckline with decreasing trading volume, raising concerns about the reliability of the formation. Low trading volume during a downside breakout could encourage traders to adopt bearish sentiment. If current trends continue, Ethereum is likely to fall to $3,501. However, if trading volume increases and buying interest strengthens, this could reverse the bearish forecast, potentially bringing Ethereum to $4,500.