Ethereum Price Rollercoaster: Will the Market Stabilize or Dip Further?

By Robin Wigglesworth

Ethereum (ETH) has experienced quite the turbulent ride following the US Federal Reserve’s latest meeting. After a sharp crash to the $3,100 area, ETH recovered sharply, bouncing back to around $3,400. The past 24 hours have left the cryptocurrency nearly flat, but losses from last week’s highs above $4,100 have already reached about 16.5%.

Fed’s Impact on Crypto and Traditional Markets

The price swings began on Wednesday, after the US Federal Reserve spooked both traditional and crypto markets. The Fed adjusted its economic outlook, warning that inflation remains stubbornly high and lowering their projections for 2025 rate cuts from four to just two. The news sent shockwaves through US equity markets, which were already overdue for a correction after a post-Trump election surge. As expected, Ethereum and other cryptocurrencies, which are highly sensitive to risk sentiment, were also hammered.

But despite the dramatic drops, Friday’s market action suggests the worst might be over. Ethereum’s price is starting to stabilize, and some analysts even see signs of a potential recovery into the year’s end.

A Bullish Dragonfly Doji on the Horizon?

Ethereum’s recent price action hints at a possible bullish turn. The daily candle chart shows a formation of a dragonfly doji, a pattern that often appears near market bottoms. The dragonfly doji is a technical signal that suggests a potential reversal, signaling that the market may be ready for a recovery.

Ethereum also found strong support near its 200-day moving average (DMA), and the price bounce from this key level shows that dip buyers are entering the market in force. This could lay the groundwork for a rally as the year comes to a close—barring any unexpected macroeconomic shocks.

Focus Shifts Back to Bullish Themes

Assuming the US Federal Reserve stays on the sidelines and avoids any major surprises, attention will likely return to bullish developments in the crypto space. For one, the incoming Trump administration’s pro-crypto stance could fuel further adoption. On top of that, the crypto industry is poised for growth, with Wall Street gobbling up supply and speculation around the establishment of national Bitcoin reserves.

While the Fed’s shift away from aggressive rate cuts isn’t great news for risk-sensitive assets like crypto, the longer-term bullish trends seem to outweigh the macroeconomic risks. The US economy remains strong, and the Fed’s inclination to ease rates in the coming years could create a “Goldilocks” environment for risk assets like Ethereum.

Ethereum’s Cyclical Relationship with Bitcoin

Looking further ahead, Ethereum’s price could follow a familiar pattern established in previous cycles. Historically, Bitcoin has broken out to new highs a month or two before Ethereum. In November, Bitcoin began its latest rally, which means ETH may follow in its footsteps by surging in January. Given the positive correlation between Bitcoin and Ethereum, this sets the stage for a potential ETH recovery early next year.

Ethereum’s Dominance in DeFi and Institutional Support

Despite concerns over Ethereum’s recent price performance compared to Bitcoin or its competitors like Solana and Sui, investors should remain optimistic. Ethereum continues to dominate the DeFi space, with around 56% of total value locked (TVL) according to DeFi Llama. Furthermore, Ethereum has solid institutional backing, including US ETFs and the support of major Wall Street players like BlackRock. In fact, a recent BlackRock executive commented that their focus is on expanding their existing Bitcoin and Ethereum ETF products rather than launching new crypto funds.

While Ethereum faces competition from other blockchains, its dominant position in the DeFi ecosystem, combined with institutional support, ensures that it remains the top player in the space. For long-term investors, this bodes well for Ethereum’s future prospects.

The Bottom Line: A Gradual Recovery on the Horizon

Ethereum’s price has taken a hit recently, but the outlook for the coming weeks remains positive. With strong support levels, bullish technical patterns forming, and significant institutional backing, the market could see a gradual recovery into the new year. While we may not see new all-time highs before the year ends, the stage is set for Ethereum to regain ground and possibly push back toward $4,000.

As 2024 approaches, it’s clear that Ethereum’s fundamentals remain robust, and investors should keep an eye on the broader crypto trends that will shape its future. The combination of adoption, institutional interest, and a supportive macroeconomic environment could lay the foundation for Ethereum’s next big move.