Ethereum’s Breakdown Deepens: Can the Fed’s Next Move Spark a Rebound?

• Ethereum mirrors 2019’s QT-driven decline, raising concerns about further weakness amid tightening liquidity conditions.
• ETH’s regression band support is crucial; a break below may trigger deeper declines, while a bounce could signal recovery.
• The Fed’s potential QT end could boost liquidity, historically marking ETH’s bottom and paving the way for a rebound.

Ethereum is selling off heavily as quantitative tightening (QT) continues. Crypto analyst Benjamin Cowen highlights the similarity of the current Ethereum cycle to the market environment of 2019. During QT in 2019, Ethereum formed a wedge pattern, briefly broke above it, then fell below. Shortly, the Federal Reserve stopped QT, leading to a bottom for ETH/BTC and a short-term pump for ETH/USD.

Today, Ethereum is once again breaking down into its long-term regression band, mirroring the 2019 scenario. With QT still in place, the likelihood of a near-term policy shift by the Fed remains high. The macroeconomic backdrop plays a crucial role in shaping Ethereum’s price action.

Ethereum’s Regression Band Breakdown

Currently, Ethereum is trading around $2,061.26, facing a steep decline after losing support from its wedge formation. The green regression channel, which historically defined Ethereum’s long-term growth, now serves as a crucial support zone. 

Additionally, a yellow symmetrical triangle, representing market consolidation, was previously broken to the upside. However, Ethereum has now retraced and fallen below its lower boundary. This movement signals potential weakness, increasing the probability of testing lower support levels within the regression band.

Moreover, the macroeconomic indicator, reflected by a blue trend line, has been decreasing since it reached its highest value in 2022. This downtrend is in line with Ethereum’s declining momentum, which reflects high correlation between liquidity conditions and prices. As financial conditions tighten up, Ethereum is subjected to increasing pressure, highlighting long-term support levels.

Will the Fed End QT Soon?

Cowen suggests that the Federal Reserve could end QT within the next few months. Historically, the conclusion of QT in 2019 coincided with Ethereum’s bottom, triggering a price rebound. If the Fed shifts its stance, liquidity could improve, supporting Ethereum’s price recovery.

Furthermore, price action within the green regression channel has historically led to strong rebounds. A potential bounce from the lower band could provide a bullish opportunity. However, if Ethereum fails to hold these levels, further declines may follow.