Stock and cryptocurrency markets have been falling this year due to rising inflation, central bank rate hikes, and the prospect of a worldwide recession. Currently trading at roughly $1,200, Ethereum has had a cumulative fall of over 80% from its all-time high of $4,891 in November 2021. So, should I buy ethereum now?
Why Did ETH Price Drop?
Cryptocurrency markets nearly appeared to be partially immune to the tech sell-off and rising risk aversion. However, recent price movements have disproved that theory. Just the quiet before the storm, ethereum's relative stability between mid-January and mid-April, when it choppyly trended up with higher highs and higher lows, was a temporary blip. Since its November high of $4,891 ($1,080 is the current price of ETH), Ethereum has decreased by approximately 80%. And there will probably be more.
The Federal Reserve's response to inflation is the key factor for the decline. At the June, July, and September FOMC meetings, it raised interest rates by 75 basis points. Further aggressive hikes are anticipated in December and beyond as well, following a better- than-anticipated US jobs data for September. It suggests that the economy is still overheating and that the Fed will take dramatic action to cool it down. The Fed may eventually raise interest rates above what the market is now anticipating, to 8%. markets, particularly the price of ETH, would be adversely affected by this.
By the end of 2021, markets had reached extraordinary valuations as a result of years of historically low interest rates following the global financial crisis in 2008. If computer companies can easily borrow money, who cares if they are unlosing money? to borrow money, they may be able to get money from investors who, like them, have probably borrowed money.
The assistance from low-cost leverage in the fiat markets has not spared the cryptocurrency markets. After all, cryptocurrency offers the scalability and regulatory arbitrage of the tech dream. Furthermore, if there was any lingering doubt that cryptocurrency was not gaining interest from low rates , the recent drops in cryptocurrency as US rates have risen should dispel that.
Should I Buy Ethereum Now?
On September 15, 2022, Ethereum made the switch from proof-of-work to proof-of-stake, also known as "the merge." The network update went ahead without incident. Additionally, despite the fact that many observers anticipated the event to increase ETH prices, it was unable to reverse the year-long general drop in investor confidence in cryptocurrencies. Ethereum's problems were further made worse by the devastating collapse of the cryptocurrency exchange FTX in November.
Longer term, we believe the Fed is still engaged in an aggressive cycle of rate hikes, and recession risks are rising. Thus, macro is having an impact on cryptocurrency. So the issue for 2022–2023 is: How low may cryptocurrency fall? We are at a point of great undervaluation, or is there still room for additional significant downside?
The overall environment is unfavorable for ethereum. We examine several neutral on-chain and flow metrics for ethereum. In general, we have a short-term neutral to bearish outlook on ETH. Therefore, it might not be a good idea to acquire ethereum right now if you have a two to four week time horizon.
What Is The Best Way To Buy ETH?
The volatility of cryptocurrencies might be very high. The use of dollar-cost averaging is one strategy for reducing the volatility. Dollar-cost averaging is a method in which you spread out your entire investment over a number of smaller purchases of the desired item. It basically means that, regardless of market conditions, you would invest the same sum of money each month or quarter.
The theory behind this is that you can buy less of an asset while prices are high. However, you can spend more money while prices are cheap. You gain from having acquired more shares at the cheaper price by having done so when the market recovers. Please be aware that applying this method won't guarantee a profit or shield you from declining pricing. Should I buy Ethereum now? It is all explained here.
