Ethereum Could Plunge Further Analyst Benjamin Cowen Warns Citing Macroeconomic Headwinds

Summary

• Analyst Predicts Further 40-50% Drop for Ethereum: Benjamin Cowen warns that Ethereum may need to decline significantly more before a true altcoin market recovery, based on historical patterns and macroeconomic factors.

• Federal Reserve’s Quantitative Tightening (QT) as Key Headwind: Cowen argues that the Fed’s ongoing QT policy is the primary driver behind Ethereum’s underperformance, especially in its Bitcoin pairing (ETH/BTC).

• “Home” Level around $1,589 Based on Historical Trendlines: Cowen utilizes logarithmic regression analysis and historical market cycle bottoms to suggest Ethereum could fall to a “home” price level in the 1,800 range before finding a bottom.

Cryptocurrency analyst Benjamin Cowen, known for founding Into The Cryptoverse, suggests that Ethereum (ETH) may experience a substantial price correction before a sustainable bullish recovery for altcoins can materialize.

In his latest market analysis, Cowen posits that Ethereum’s continued weakness relative to Bitcoin is symptomatic of broader macroeconomic forces at play.

He contends that a genuine turnaround in Ethereum’s price trajectory is likely contingent upon a shift in the monetary policy of the U.S. Federal Reserve.

Cowen emphasizes the significance of analyzing Ethereum’s performance against Bitcoin rather than solely against the US dollar, arguing that the ETH/BTC pairing offers clearer insights into underlying cyclical patterns.

He suggests that examining this ratio provides a more profound understanding of Ethereum’s market dynamics.

According to Cowen’s analysis, Ethereum’s current struggles within this market cycle are intrinsically linked to the Federal Reserve’s ongoing quantitative tightening (QT) measures.

He draws a sharp contrast to previous bull market phases, where this factor was not as prominent.

Quantitative tightening, in essence, is a process where the Federal Reserve shrinks its balance sheet by reducing its holdings of government bonds, either through direct sales or by allowing them to mature without reinvestment.

This action effectively reduces the overall money supply in the financial system, typically leading to increased interest rates and reduced liquidity, conditions that can be detrimental to riskier asset classes such as cryptocurrencies.

“Ethereum’s persistent decline relative to Bitcoin can be largely attributed to the prevailing quantitative tightening environment,” Cowen stated.

He observed that in prior market cycles, the ETH/BTC ratio typically did not reach a definitive bottom until the Federal Reserve ceased its quantitative tightening policies – a condition that has not yet been met in the current cycle.

Although the Federal Reserve has recently decelerated the pace of QT, reducing it from $60 billion to $40 billion per month, Cowen analogizes this adjustment to a reduced, but still negative, force: “Even though the force has diminished, the direction remains unfavorable.”

Ethereum’s Recovery Hinges on Fed Policy Shift

Cowen projects that Ethereum may need to undergo an additional price decrease of 40% to 50% to reach what he terms its “home” level.

He defines “home” as a lower logarithmic regression trendline, a critical technical level that has historically coincided with major cycle bottoms, specifically in December 2016 and December 2019.

Currently, Ethereum’s price is approximately 37% below its recent peak.

Cowen’s risk assessment models indicate that a further decline to between $1,300 and $1,800 is plausible, with his calculated “home” price target around $1,589.

Examining Ethereum’s Performance Through the Bitcoin Lens

Drawing historical parallels, Cowen points to the stock market downturns of 1990 and 1998. He notes that similar patterns of “triple top” formations and pervasive economic uncertainty preceded substantial market rebounds in those instances.

These recoveries only commenced after significant and often painful price declines had occurred.

“It’s a common sentiment that ‘this time is different’ for Ethereum,” Cowen concluded, addressing the frequent assumption that market cycles may not repeat.

“But the historical data reveals a recurring pattern that has played out consistently. And based on current indicators, this established pattern appears to be unfolding once again.”

Also Read: Ethereum’s Price Trend Four Months of Declines Spark Bottoming Debate Against Bitcoin

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