Ethereum has shown a strong correlation with small-cap equities, which are particularly sensitive to interest rate changes, and analysts suggest both could rise if further cuts are implemented.
On Tuesday, analysts at macro-focused outlet Milk Road highlighted an “almost spooky” correlation between Ether and the Russell 2000 Index, a benchmark of small-cap U.S. equities.
Both Ether and the Russell 2000 are highly rate-sensitive. With the possibility of up to four consecutive rate cuts, the analysts said investors should “expect both to move up in tandem.”
The Russell 2000 Index tracks 2,000 U.S. public companies with smaller market capitalizations and is widely used as a barometer for the U.S. economy.
According to CME futures markets, there is currently a 95.7% chance of a 0.25% rate cut by the Federal Reserve at its Oct. 29 meeting, and an 82.2% probability of another cut in December.
“Unlike Bitcoin, Ether generates yield, which is especially important in a world where rate cuts are not only priced in but almost guaranteed,” said Justin d’Anethan, head of partnerships at crypto private markets firm Arctic Digital, in a conversation with Cointelegraph.
ETH and Russell 2000 Show Bullish Signals
Ethereum and the Russell 2000 appear to be forming a cup-and-handle pattern, a bullish continuation setup that often signals a consolidation phase followed by a potential breakout.
Michaël van de Poppe, founder of MN Fund, noted on Wednesday two key reasons ETH could soon reach a new all-time high.
First, the ETH/BTC trading pair appears “bottomed out” and ready for a new upward leg after a normal correction.
Second, gold’s parabolic rise—which recently surpassed $4,000 per ounce—suggests a potential pullback, which could trigger a shift into risk-on assets.
“If central banks globally move into easing mode, capital is likely to rotate into risk assets with upside potential, and ETH fits that profile,” added Justin d’Anethan of Arctic Digital.
New Ether Peak Approaching
Chart analyst Matt Hughes commented on Wednesday that “ETH looks primed to break into all-time high territory, as it’s finally finding stability above the $4,350 level.”
“As long as that zone continues to hold as support, ATHs aren’t too far away.”
Chart analyst Matt Hughes has set a target of $5,200 for Ether’s next upward leg, while analyst ‘Poseidon’ predicts the cycle could peak at $8,500.
At the time of writing, Ether was down 6% on the day, trading around $4,430 and approaching a key support zone near $4,400.
