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Ether’s price has continued to decline, dropping 5.2% from September 3 to September 4 after facing strong resistance at the $2,550 level. This marks eight days since Ether last closed above this price point. Traders are growing concerned that Ether might underperform even if the broader cryptocurrency market experiences a resurgence. Several factors contribute to this situation.
Firstly, {Ethereum} (ETH) price pressure is partly due to the broader economic context. There is uncertainty regarding the U.S. Federal Reserve’s impending decision on interest rates, expected to begin in September. Former Kansas City Fed President Esther George has noted that while there is hope for inflation to stabilize at 2%, the Fed’s credibility might be questioned if the job market weakens. Additionally, Philadelphia Fed President Patrick Harker has indicated that rate cuts might become more aggressive if the labor market deteriorates. Typically, more expansionary monetary policies benefit risk-on markets. However, fears of a potential recession could drive investors towards safe-haven assets, negatively impacting Ether’s price.
Moreover, concerns are mounting over the tech sector, especially following Nvidia's significant market capitalization loss and its involvement in a U.S. Department of Justice antitrust investigation. This situation highlights broader worries about tech stocks and their influence on related markets.
Ether is facing specific challenges, including lower Ethereum network fees, reduced staking rewards, and weak demand for its spot exchange-traded fund (ETF) products. Ethereum network fees have recently dropped to their lowest level in over four years, reflecting reduced activity on the Ethereum base layer. This decline, attributed to the lower cost of data availability for rollups, has raised concerns about Ethereum’s long-term sustainability. Additionally, the lack of engaging consumer-facing applications on layer-2 solutions has contributed to this downturn.
Ether’s spot ETF products have also experienced significant net outflows, totaling $475 million since their U.S. market debut on July 23. This decline in institutional interest contrasts with earlier expectations of strong demand. Furthermore, the current staking reward of 3.2% is relatively low compared to traditional financial instruments, leading to additional investor disappointment.
Overall, without significant changes in these factors, Ether’s price is unlikely to surpass $2,550 in the near term, and it may struggle to outperform the broader cryptocurrency market.
