ETFs
Here’s Why Ethereum Price Lags QQQ, SPY, and DGRO ETFs
Ethereum price remained in a tight range on Monday morning, mirroring other cryptocurrencies like Bitcoin, Solana and Ripple. ETH was trading at $2,930, where it has been for the past few days. This price is significantly below the yearly high of $4,097.
US stocks lagging
Ethereum and other cryptocurrencies are underperforming popular U.S. exchange-traded funds (ETFs). The closely watched iShares Core Dividend Growth ETF (DGRO) soared to $57.7, its biggest rise since April 1. It is nearing its all-time high of $58.20. It has surged nearly 38% from its 2022 low point.
The same thing is happening to other popular U.S. stock ETFs like the SPDR S&P 500 (SPY) and Invesco QQQ (QQQ), which have risen over the past three weeks and are nearing their all-time highs.
The divergence between Ethereum ETFs and US stocks occurred for several reasons. First, U.S. companies reported strong financial results. Data by FactSet shows that about 92% of all S&P 500 constituents have reported their first quarter results. These companies reported mixed profit growth of 5.4%, the highest figure since the second quarter of 2022.
Second, there are signs that the Federal Reserve will cut rates sooner than expected. Recent economic figures have shown that the economy is slowing. It grew just 1.6% in the first quarter, after growing around 3.4% in the fourth quarter. Additional data revealed that consumer confidence fell in April while the manufacturing and services PMIs fell below 50.
In the financial market, weak economic numbers tend to be good news because of their impact on the Fed. Now, analysts expect the Fed to make two interest rate cuts this year, up from a previous estimate of one.
In a statement last week, Tom Lee, the founder of Fundstrat, said he expects inflation to continue to fall as housing and insurance prices decline. Therefore, this week’s inflation report will provide more information on trends.
Smaller rate cuts will have a positive impact on stocks as investors have invested more than $6 trillion in money market funds (MMFs). Therefore, if rates start to fall, it is possible that these investors will return to stocks.
Additionally, stock ETFs like QQQ, SPY, and DGRO continued to perform well as market volatility decreased. The closely watched VIX index has fallen for the past eight consecutive days. It has collapsed more than 40% from its peak this year.
Ethereum Challenges Remain
On the other hand, there are concerns about the cryptocurrency sector as it lacks a clear catalyst. The biggest catalysts, like the approval of 11 Spot Bitcoin ETFs and the recent Bitcoin halved have already arrived.
At the same time, there are concerns over the approval of an Ethereum spot ETF by the Securities and Exchange Commission. The SEC will likely deny recent requests because it considers Ethereum an unregistered security.
Additionally, one of the primary use cases for Ethereum and other blockchains has imploded. There are signs that the NFT Industry is dead. Data compiled by CryptoSlam shows that Ethereum has only processed $5.0 million worth of NFTs in the last 24 hours. At its peak, the network managed over $50 million in tokens.
Ethereum also faces strong competition from other blockchains like Solana, Avalanche, TonCoin, and Base.
Ethereum Price Prediction
On the positive side, there are chances that the Ethereum price will rebound. As shown below, the chart shows that the ETH price has formed a falling wedge pattern, which is one of the most bearish signs. This wedge is approaching the confluence level, which means the price could make a bullish breakout in the coming weeks.
