Ether’s recent surge past $4,700 is being driven largely by expectations of a U.S. Federal Reserve rate cut in September — a bet that could backfire if it doesn’t materialize, crypto analysts caution.
“The main concern right now is that the entire market rally hinges on the assumption that the Fed will cut rates next month,” Swyftx lead analyst Pav Hundal told Cointelegraph on Thursday. Ether is currently trading just 2.80% below its 2021 all-time high, according to CoinMarketCap data.
Traders are pricing in a 95.8% probability of a September rate cut, based on the CME FedWatch Tool.
Ether valued for an ideal scenario
“We appear to be priced for perfection — and that’s exactly when caution is most important,” Hundal warned, noting the strong Ether ETF inflows and stable funding rates.
On Monday, spot Ether ETFs saw their largest-ever day of net inflows, with a combined $1.01 billion flowing into all funds. The asset has jumped 30% in just the past week.
Capriole Investments and REF founder Charles Edwards told Cointelegraph he remains highly bullish on Ether and expects further price gains, but acknowledged that an unexpected Fed decision could still affect the market:
“What if the Fed, what if something happens, inflation goes up, or, you know, some unknown changes, and they decide not to cut or this, you know, or there’s a major war breakout, again.”
Edwards noted that an unexpected Fed move could “spook liquidity, causing capital to freeze up and inflows to dry.”
While he won’t “rule out anything,” Edwards said he remains bullish as long as institutional demand continues to outpace the available supply of both Bitcoin and Ether. “Honestly, there’s only one direction price can go,” he said.
“I’m open to all scenarios, but right now I see it heading much higher,” Edwards added, suggesting Ether could “quite easily double” in the coming months if Bitcoin rises to between $150,000 and $200,000.
“With strong fundamentals in place, there’s plenty of room for significant upside,” he said.
Some economists remain unconvinced a September rate cut is coming
While many market participants are betting on a September rate cut, some economists remain skeptical that it will happen.
On Wednesday, Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management, said, “The biggest thing to watch now is … are [Fed officials] going to push back on market expectations.” She added, “If they think the market is wrong, they will go out there, because they’ve got a job to do to talk down the market.”
Meanwhile, Jeff Schmid, president of the Federal Reserve Bank of Kansas City, indicated that current rates remain appropriate. “With the economy still showing momentum, growing business optimism, and inflation still above our target, maintaining a modestly restrictive monetary policy stance remains appropriate for now,” he said.
On Wednesday, U.S. CPI data for July showed inflation holding steady at 2.7% year-over-year, unchanged from June and slightly below the forecast of 2.8%.
