Ether price witnessed a 10% price increase in the first nine days of February, breaking above $2,450 for the first time in three weeks. This movement was aligned with the broader cryptocurrency market’s bullish momentum and significantly influenced by the macroeconomic environment.
Despite the reasons behind Ether’s (ETH) rally, investors are growing more bullish as deposits on the Ethereum network increase. However, is this momentum sufficient for a sustainable rise above $2,800?
Weak economic data in China and U.S. fiscal debt trends create opportunity for risk-on assets
On Feb. 4, United States Federal Reserve Chair Jerome Powell emphasized the need for a more sustainable public debt path in an interview. In 2023, U.S. debt service costs represented 2.4% of the economy’s gross domestic product, and projections indicate a potential increase to 3.9% in 2034, as reported by the Congressional Budget Office. These projections will prompt the Fed’s policy interest rate to decrease, according to Neil Irwin, author of Axios Macro.
Traditional finance investors faced additional concerns from China when the January Purchasing Managers’ Index revealed manufacturing activity contraction for the fourth consecutive month. Following the Chinese central bank’s largest cut in mandatory cash reserves for banks in three years, the government introduced measures to support the real estate development market, currently under pressure due to high debt leverage, according to AP News.
Investors also sold some fixed-income positions, causing the two-year U.S. Treasury yield to reach its highest level in two months at 4.48%, up from 4.21% on Feb. 1. Simultaneously, on Feb. 9, the S&P 500 index reached a record high above $5,000, indicating that investors are not overly concerned about a potential economic crisis, at least in the short term. Nevertheless, the U.S. fiscal debt trends, highlighted by the Fed chair, create an ideal scenario for scarce alternative assets such as Ether.
This movement poses challenges for cryptocurrencies as the stock market continues to attract the majority of the flow for risk-on assets….
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