With the crypto market rally slowing down already, digital assets in the space such as Ethereum (ETH) are already recording a decline in their prices. The second-largest cryptocurrency by market cap has closely followed the downtrend started by Bitcoin, falling once more to the $1,700 level. But will there be a recovery or is ETH destined to revisit $1,500 once more?
Crypto Market Slows Down On FOMC Anticipation
The slow down in the crypto market that has caused prices to retrace can be easily tied to the anticipation around the next FOMC meeting happening March 21-22. Even though expectations are that the Fed would only raise rates by another 25 basis points, it still has a stronghold on the market as it doesn’t always go along with expectations.
Given this, investors have seemingly slowed down in the market, causing digital assets to fall back toward support levels. This is not unusual and it is not peculiar to the crypto market. It is because based on how much the Fed hikes rates, it can either be very good or very bad for the crypto market.
Each announcement has an effect on equities markets and given Bitcoin’s high correlation to the stock market so far, the reaction trickles down into the crypto market. Expectations of a positive announcement is also obvious given that the assets are holding up quite nicely with BTC still maintaining above $27,000 and ETH holding $1,700.
What Could Drive Ethereum Price To $1,500
Despite the expectations of a 25 basis point hike, which would show that the Fed was slowing down its tightening, there is always the possibility that the hike is higher than expected. The last FOMC saw a 25 basis point hike, so another 25 bps hike or lower would be ideal to enable markets and the assets in them to hold their value.
ETH gearing up to test $1,800 resistance | Source: ETHUSD on TradingView.com
However, if the Fed were to resume its tightening and announce a 50 basis point hike, it would be devastating for the market, especially risk assets such as Bitcoin and Ethereum. Such an announcement would quickly cascade through the space and ETH falling to $1,500 becomes a very real possibility.
Even if the FOMC announcement comes out worse than expected, ETH bulls will likely not go down without a fight. There is significant support at the $1,700 level and then again at $1,620. These will hold even better than $1,800.
More importantly, ETH is still firmly above the 100-day and 200-day moving averages. These two are important indicators that suggest that the possibility of further uptrend is higher than the possibility of a decline below $1,500.