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Bulls have regained dominance in the cryptocurrency market on Wednesday, with the price of Ethereum (ETH) surging over 4% back towards $3,800 following the latest US inflation data, which nearly guarantees that the US Federal Reserve will implement another 25 basis points interest rate cut later this month.
Just In: November US CPI annual inflation rises 2.7%, aligning with expectations for 2.7%.
Core CPI inflation increased 3.3% Y/Y, consistent with forecasts for a rise of 3.3%.
What action will Jerome Powell take now? pic.twitter.com/xgQPwTmokZ— Jesse Cohen (@JesseCohenInv) December 11, 2024
The most recent US inflation report brought no unexpected results, and markets are now pricing in a 96.2% probability of a 25 basis points rate reduction later this month, according to the CME’s Fed Watch tool.
The price of Ethereum remains approximately 7.5% lower than last week’s peaks around $4,100.
However, its technical configuration appears robust, and many analysts would contend that the recent market pullback was beneficial, as it eliminated excessive leverage, establishing a base for a more substantial rally.
In recent weeks, as ETH climbed from below $3,000 to its recent highs exceeding $4,000, the funding rate for traders seeking leverage had surged to as high as 0.0688%, according to coinglass.com.
This indicates that the recent price increase was accompanied by a rise in demand for leveraged long positions, heightening the risk of short-term volatility.
Nonetheless, following the latest market correction, funding rates have returned to around 0.008%, indicating that this speculative excess has largely been removed from the market.
Where Next for Ethereum Price – New ATHs This Month?
With speculative excess now cleared from the market, the likelihood of a more sustainable Ethereum price rally as the year concludes has increased.
Fundamentals and macroeconomic factors are certainly favorable – the Fed is expected to continue lowering interest rates amid a strong US economy (which benefits risk assets), and optimism remains high ahead of the pro-crypto Trump administration taking office in January.
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Technical charts are also indicating a bullish trend. The recent bounce of the Ethereum price at $3,500, from its 50-day moving average and July highs, suggests that the bulls have maintained control of this market.
As Bitcoin (BTC) rises above $100,000 and ETH climbs back above $3,800, a retest of last week’s highs seems probable.
But could ETH continue to reach new all-time highs above $4,800 this month?
Historical trends in the cryptocurrency market and Ethereum’s correlation with Bitcoin suggest that the prospects are favorable.
Bitcoin is currently trading precisely in accordance with its four-year price cycle, where it typically breaks into a new price discovery phase within eight months following the halving.
As Bitcoin reaches new record highs and enters a price discovery phase, Ethereum has historically lagged behind.
It usually takes Ethereum an additional month to return to its all-time highs, followed by another month to enter its own price discovery phase.
Current trends appear to mirror past patterns, indicating that Ethereum could retest its record highs this month and then significantly surpass them in January.
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