Ethereum has shown a significant correlation with small-cap equities, which are particularly affected by interest rates, and analysts suggest both may rise with forthcoming cuts expected.
Macro investor outlet Milk Road reported on Tuesday that an “almost spooky” correlation exists between Ether (ETH) and the Russell 2000 Index, which tracks small-cap stocks.
Both are notably responsive to interest rate fluctuations, and with up to four consecutive cuts possibly on the way, the analysts advised to “anticipate both moving upward together.”
The Russell 2000 Index monitors 2,000 US publicly traded companies with smaller market caps and is commonly used to evaluate US economic performance.
CME futures markets currently indicate a 95.7% chance of a 0.25% rate cut by the Federal Reserve at its Oct. 29 meeting, with an 82.2% probability of an additional cut in December.
“Unlike Bitcoin, Ether yields returns, which is significant in a context where rate cuts are not only expected but almost assured,” Justin d’Anethan, head of partnerships at crypto private markets firm Arctic Digital, stated to Cointelegraph.
ETH and the Russell 2000 also seem to exhibit a cup-and-handle pattern, a bullish continuation formation indicating a consolidation phase preceding a breakout.
Rotation into risk assets
MN Fund founder Michaël van de Poppe remarked on Wednesday that two factors indicate ETH will soon achieve a new all-time high.
Firstly, the ETH/BTC trading pair “appears to have bottomed out” and is poised for a new upward movement following a relatively typical correction.
Secondly, gold is “incredibly parabolic,” having reached above $4,000 per ounce, suggesting it should decline soon, “triggering the significant risk-on switch.”
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“If global central banks enter easing mode, there’s a compelling case for capital to shift into risk assets with potential upside, and ETH meets that criteria,” d’Anethan added.
New Ether peak is close
“ETH seems ready to ascend into all-time high territory, as it’s finally stabilizing above the $4,350 range,” commented chart analyst Matt Hughes on Wednesday.
“As long as that zone holds as support, new ATHs aren’t far off.”
Hughes projected $5,200 as the next target for Ether, while analyst ‘Poseidon’ indicated the cycle peak would be $8,500.
At the time of writing, Ether had corrected, trading down 6% on the day at $4,430, nearing a crucial support area around $4,400.
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