Ether Price Rally: The Impact of Hong Kong's Spot ETH ETF and U.S. Economic Policies

Today's rise in Ether price is attributed to growing interest in the spot ETH ETF in Hong Kong, coupled with investors' anticipation of a more accommodative monetary policy in the U.S., which has bolstered market sentiment.

Source: www.inx.co

Following a 14.2% decline from April 28 to May 1, which saw Ether bottom out at $2,817, the cryptocurrency regained some of its losses on May 2. This downturn resulted in $162 million in leveraged long liquidations. However, a subsequent 6.4% rise between May 1 and May 2 propelled Ether's price close to the $3,000 mark.

Spot Ethereum ETF Launch Shows Strength Amid Weaker Economy in Hong Kong

The recent downturn in the cryptocurrency market can be largely attributed to deteriorating macroeconomic conditions. In the United States, persistent inflation and lower-than-expected 1.6% growth in the first quarter have contributed to market uncertainty. In Asia, interventions by the Bank of Japan to stabilize the yen's depreciation, alongside the Eurozone's modest 0.4% annual GDP growth, further added to economic concerns.

Ether's value suffered as traders adopted a more risk-averse stance, a sentiment that also impacted various other asset classes. For example, WTI oil prices plummeted to a 50-day low at $78.18 on May 2. Additionally, commodities like copper and wheat experienced declines of 4.4% and 3.2%, respectively, since April 29.

The cryptocurrency sector faced significant pressure, highlighted by the first-ever net outflows from the BlackRock Bitcoin spot exchange-traded fund (ETF) on May 1. Total spot Bitcoin ETFs witnessed a net outflow of $1.2 billion over the six trading days starting April 24. The lack of interest from institutional investors is particularly concerning as the deadline for the U.S. Securities and Exchange Commission (SEC) to decide on spot Ethereum ETFs approaches. The final decision on the Ethereum ETF requests is due by May 23, adding to market uncertainties.

Despite the waning interest in U.S. spot Bitcoin ETFs, Hong Kong introduced its own spot cryptocurrency instruments on April 30. On the inaugural trading day, spot Ethereum ETFs observed net inflows of $44 million, signifying a notable demand for these products. While the trading volume was relatively modest, it's essential to acknowledge that Hong Kong's ETF market is considerably smaller compared to that of the U.S.

ETH On-chain Network Events and Impact of Federal Reserve's Remarks

According to data from DappRadar, Ethereum's DApps volume grew by 15% over the past week, reaching $42.2 billion. This contrasts with a 20% decline in BNB Chain and a 6.5% drop in Solana’s DApps volume. Noteworthy performers on the Ethereum network included Balancer, which saw a 31% increase, Curve with a 21% boost, and Dodo, which experienced a substantial 57% surge. In terms of user engagement, Ethereum led with a 29% rise in active addresses over the week. In comparison, BNB Chain and Solana recorded decreases of 13% and 14.5%, respectively. Significant growth in Ethereum's user base was noted particularly in applications such as Xterio, EigenLayer, and Zerion.

Ether’s valuation also gained momentum following remarks from the U.S. Federal Reserve Chair Jerome Powell after the FOMC meeting on May 1. Powell suggested that the interest rates might have peaked at 5.5%, a scenario that typically favors risk-on assets like cryptocurrencies. While interest rate reductions might not occur until possibly the first half of 2025, investors remain optimistic. The expectation is that as inflation continues to overshadow fixed-income yields, the market will increasingly favor riskier asset classes. For now, Ether investors are reassured by signs that the Federal Reserve's aggressive liquidity tightening could be winding down.

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.