The cryptocurrency market continues to face selling pressure. On April 30th, the price of Ethereum fell by about 6%, reaching its lowest level in over a week at $3,024. This decline in the cryptocurrency mirrored similar downward movements across other parts of the crypto market, with the total market value dropping by approximately 4%.
Why Is Ethereum Falling?
Key factors contributing to the drop in Ethereum‘s price include the lukewarm response to newly launched crypto-linked spot exchange-traded funds (ETFs) in Hong Kong and the expected hawkish stance from the Federal Reserve.
On April 30th, six crypto ETFs launched in Hong Kong significantly underperformed, achieving only $11 million in total trading volume, far below the expected $100 million. Of this total, $8.5 million was from Bitcoin ETFs, with the remainder attributed to Ethereum ETFs.
This performance starkly contrasts with the $655 million first-day trading volume of U.S.-based spot Bitcoin ETFs launched on January 11th, which have since attracted nearly $12 billion in investor funds. However, recent entries have slowed, hindering Bitcoin’s upward trend and dragging down other positively correlated cryptocurrencies like Ethereum.
Ethereum and the Crypto Market
Today’s price drop in Ethereum appears to stem from concerns that the Federal Reserve may maintain its hawkish messages at the Federal Open Market Committee meeting on May 1st. According to CME data, expectations for interest rate cuts have been postponed to late 2024, with no more than two cuts anticipated by year-end. This adjustment is largely linked to persistent inflation and the lagging U.S. economy.
The crypto market has seen declines ahead of recent FOMC meetings, exemplifying investors’ increased caution. For instance, market valuation dropped over 10% before the March FOMC meeting and about 5% before the January meeting. In response, leading cryptocurrencies like Bitcoin and Ethereum also fell. This process illustrates how investors adjust their positions in anticipation of expected changes in monetary policy.
