The Ethereum price has been trending higher for the past week as general sentiment in the market improves. The second crypto by market capitalization could extend its gains if macroeconomic conditions continue to support the rally.
At the time of writing, Ethereum price is trading at $1,333 with sideways movement in the last 24 hours. Over the past week, the cryptocurrency posts a 10% gain and ranks as one of the best performers in the top 10 by market capitalization.
Ethereum Price Follows Market Sentiment
according to a report From analysis firm Blofin, market sentiment has improved based on widespread reports of an economic downturn. These expectations of worse financial data could force the US Federal Reserve (Fed) to ease its monetary policy.
The financial institution has been raising interest rates to curb the highest inflation recorded in decades. As a result, the global market is suffering. If conditions get too bad, the market believes the Fed will back down, allowing Ethereum and other risk assets to rally.
Today, the Fed will provide more information on its next steps; if it slows down, the Ethereum price is likely to continue its bullish trajectory. The positive expectations are spreading to other crypto-financial sectors.
According to Blofin, there have been positive developments in the futures and options sectors. The firm noted the change in sentiment for the first quarter of 2023, compared to the fourth quarter of 2022:
There is also a rebound in expectation taking place. In the futures market, the positive basis term structure has held for some time. Although the futures basis is still around parity, implied investor expectations are not pessimistic as they were in 2022t4.
Crypto Market to see more volatility
A fall in the US dollar supports the bullish continuation of the Ethereum price. As measured by the DXY Index (DXY), the coin is retesting critical support that allows ETH and other risk assets to appreciate.
However, the fall in the DXY hints at an increase in the volatility of the crypto market. According to Blofin:
It is worth noting that the implied volatility of BTC options for the previous month has increased a bit. With December CPI data about to be released, the play between investors in the spot and derivatives markets may further increase implied volatility.
Implied volatility measures the future movement of an asset’s price. The analytical firm believes that short-term metrics point to the upside, but in the medium and long term it still shows “a relatively bearish attitude.”
Options traders are accumulating calls (long positions) for BTC with an expiration date set for January 27. The exercise price for these contracts is $18,000 and $19,000. In other words, cryptocurrency traders are betting that BTC (and therefore the price of Ethereum) will be much higher than current levels by the end of the month.
