The cryptocurrency market faced further declines on Monday, led by Bitcoin (BTC) and Ethereum (ETH), as investors reacted to renewed uncertainty surrounding US monetary policy and the outlook for crypto regulation. Ongoing weakness followed a week of losses for major digital assets, prompting investors to reassess risk exposure as both regulatory and macroeconomic dynamics shifted.
Political uncertainty and Fed policy challenge crypto markets
Risk sentiment waned after the Democratic Party achieved victories in both chambers of the US Congress during the recent midterm elections. This shift in the US political landscape has introduced uncertainty regarding the future of digital asset regulation and the direction of artificial intelligence policy.
Market participants closely watched the potential for regulatory reforms that could affect the cryptocurrency industry. Questions surrounding changes in legislative priorities are contributing to caution among investors in digital assets and emerging technologies such as AI.
Additionally, strong labor market data has reinforced expectations that the Federal Reserve may raise interest rates at its December 9 meeting. In October, the US economy added 165,000 jobs, while the unemployment rate measured 4.1%. These figures have supported the outlook for continued monetary tightening.
Analysis from the CME FedWatch tool showed traders attributing about an 80% chance to a 25-basis-point increase in the policy rate next month, which would raise it to a range of 4.00% to 4.25%.
Higher US interest rates generally curb appetite for speculative assets like cryptocurrencies by improving the yields of traditional interest-bearing assets and limiting overall market liquidity.
For Ethereum, a stricter monetary environment limits near-term recovery attempts unless labor market data or central bank guidance shift investor expectations.
ETF outflows and institutional caution deepen
Institutional sentiment also appeared to weaken, as exchange-traded products linked to major cryptocurrencies experienced significant outflows. Last week, US spot Ethereum ETFs recorded net withdrawals totaling $365.28 million, extending a streak of six consecutive weeks of net outflows. The persistent decline in institutional demand for ETH has increased selling pressure and contributed to Ethereum’s struggle to maintain critical technical support levels.
Analysts pointed to these outflows as a signal of ongoing caution among larger investors, especially amid deteriorating price action and tepid activity in derivatives markets.
Mini dictionary: CME FedWatch Tool, a widely used market tool by CME Group that displays the probability of Federal Reserve interest rate moves based on pricing in the US interest rate futures market. This tool helps traders gauge expectations for monetary policy decisions.
| Week Ending | Ethereum ETF Net Outflows |
|---|---|
| Last week | $365.28 million |
| Trend | 6 consecutive weeks |
Technical outlook: ETH eyes $2,000 as support weakens
Ethereum entered Monday trading just above $2,100 after losing around 6.5% during the previous week. The cryptocurrency remains below its 200-day exponential moving average (EMA) at $2,318 and its 50-day EMA at $2,370, keeping the trend under pressure from the sell side. These EMAs now act as major resistance, complicating efforts by buyers to drive a sustained recovery.
Technical momentum currently favors the bears, with the daily relative strength index (RSI) hovering near 33, approaching oversold territory, and the MACD indicator staying deep in negative territory.
Having already lost its $2,199 support, Ethereum’s next key support sits at the psychological $2,000 level. This area is strengthened by the May 28 high at about $1,967, forming a broad zone where buyers are likely to defend prices.
If Ethereum breaks decisively below $2,000, the market structure could deteriorate further, exposing the coin to additional downside. On the other hand, a recovery above $2,262 resistance could attract new buyers, with potential for a move back toward key moving averages near $2,319 and $2,371.
Analysts cautioned that recapturing these levels would require renewed institutional interest and improvement in overall crypto market sentiment. Until these conditions materialize, Ethereum remains vulnerable to further tests of the $2,000 threshold, particularly if ETF redemptions persist and the US central bank maintains a restrictive policy stance.
