What's the Reason Behind Ether Price Surge?

Ether’s price has recently experienced notable gains, driven by a confluence of factors including Donald Trump’s endorsement of cryptocurrencies and potential shifts in U.S. Federal Reserve policy. As the cryptocurrency market reacts to these developments, Ethereum (ETH) is emerging as a key beneficiary.

Trump’s Keynote Spurs ETH Price Rally

On July 29, Ether’s price surged by 3.5%, approaching the $3,400 mark, largely fueled by Donald Trump's significant crypto endorsement at the Bitcoin 2024 conference in Nashville. Trump’s keynote addressed the U.S. Bitcoin community, proposing the creation of a national strategic Bitcoin reserve where the government would retain all Bitcoin it currently holds or acquires in the future. This endorsement, combined with supportive statements from Republican Senator Cynthia Lummis about a bill to acquire 1 million BTC over the next five years, has injected optimism into the crypto market.

Regulatory Optimism Boosts Crypto Market

The positive reaction from Trump’s speech has extended beyond Ether to the broader cryptocurrency market. His pro-crypto stance and potential regulatory changes in the U.S. have fueled expectations of increased crypto adoption. Further boosting market sentiment, Hong Kong Legislative Council Member Johnny Ng announced plans to explore Bitcoin’s incorporation into the region’s financial reserves. This growing optimism has driven Bitcoin and other cryptocurrencies higher, with Ether following suit.

Anticipation of Federal Reserve Policy Shift

Ether’s recent price surge also coincides with expectations surrounding the Federal Reserve’s upcoming policy announcement and remarks by Chair Jerome Powell. The Federal Reserve’s benchmark interest rate is currently set at 5.25% to 5.5%. Recent indicators, such as a balanced labor market and declining inflation, suggest a potential for lower borrowing costs. Experts, including former New York Fed President William Dudley and economist Mohamed El-Erian, are advocating for more aggressive rate cuts. This has led to an improved probability of a September rate cut, which has climbed to 87.7% from 57.9% a month ago.

Investment Appeal of Cryptocurrencies

With the Fed’s potential move towards lower rates, the attractiveness of non-yielding, “riskier” assets like Bitcoin and Ether has increased. Recent declines in the yields on both short-dated and long-dated U.S. Treasury notes have made these cryptocurrencies more appealing to investors seeking higher returns. This shift in investment dynamics has contributed to Ether’s recent price rally.

Ethereum Futures Show Increased Funding Rates

Another key factor contributing to Ether’s price increase is the rise in Ethereum futures funding rates. As of July 29, these rates reached 0.26% per week, a significant jump from the month-to-date low of 0.014% per week. The open interest in Ethereum futures has decreased to $13.97 billion from a monthly peak of $15.22 billion. This combination of rising funding rates and falling open interest typically indicates that bearish positions are being closed, signaling increased bullish sentiment among traders.

Technical Indicators and Price Targets

From a technical perspective, Ether’s recent price movement reflects a rebound from a crucial support confluence. This includes the 200-day exponential moving average (EMA), a 0.236 Fibonacci retracement line, and the lower trendline of its descending channel pattern. Ether is now approaching the upper trendline of this channel at approximately $3,460, aligning with the 0.5 Fib retracement line. A breakout above this channel could potentially propel the price towards the next Fibonacci level at around $3,600.

Ether’s recent price gains are underpinned by a blend of positive market sentiment from Donald Trump’s crypto endorsement, anticipation of favorable Federal Reserve policy changes, and technical indicators signaling potential further gains. As the cryptocurrency market adjusts to these developments, Ether remains a focal point, with its price movements influenced by both macroeconomic factors and technical analysis.