30s Summary

The Federal Reserve’s expected interest cut may boost Ethereum’s Ether (ETH) potentially making it surpass Bitcoin. Ether’s lackluster performance is attributed to the high U.S interest rates that have eroded its online appeal, but the anticipated cut could shift the Ether-Fed yield difference in favour of Ether, attracting more investors. This possible upturn is buoyed by the recent victory of pro-crypto presidential candidate, Donald Trump. However, the predicted rate cut has already been considered by interest rate traders, potentially limiting any significant positive reactions, and apprehensions over Trump’s possibly inflationary policies might slow or halt these cuts.

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The recent Fed interest rate cut could considerably tip the scales in favor of Ethereum’s native token, Ether (ETH). Consequently, Ether could even edge past Bitcoin, once the interest-rate reduction is confirmed.

Ether, one of the most well-known yield-bearing cryptocurrencies, might experience a significant boost if the Federal Reserve opts for the anticipated interest-rate cut. So far, Ether’s performance has been rather underwhelming compared to Bitcoin, with the former witnessing a meager 23% surge in contrast to Bitcoin’s impressive 77% hike.

Currently, Ether is trading at $2,800, a marked slump from its 2021 peak of $4,868. Bitcoin, on the other hand, is hovering around $74,000, nearing its recent record high that coincided with Donald Trump nearly clinching the U.S. presidential election.

Ether’s lackluster performance can be attributed to the U.S.’s high interest rates, which have undermined Ether’s allure as an internet bond. The blockchain-based coin offers a fixed-income-like yield in return for staking the token. However, for the past two years, Ether’s annualized staking yield has consistently dipped below 4% – significantly less than the benchmark U.S. interest rate of 5%.

The Federal Open Market Committee (FOMC) is expected to cut the borrowing cost by 25 basis points to 4.5%. The FOMC previously implemented a sweeping rate reduction of 50 basis points in September.

If this happens, the Ether-Fed yield differential will likely shift in favor of Ether, potentially attracting more investors’ interest. The recent victory of the pro-cryptocurrency candidate, Donald Trump, in the U.S. presidential elections, has already signaled a potential recovery for Ether and DeFi coins.

If Ether can overcome the trendline that has characterized its downward trajectory since May, the rate cut could affirm the breakout, paving the way for a rally beyond $3,000.

It should be noted, though, that the predicted rate cut has already been factored in by interest rate traders, which could potentially limit any large positive reactions in macro assets, such as Bitcoin. On the other hand, increasing concerns about Trump’s potentially inflationary policies could lead to slower rate cuts or even a halt in the coming months.