Ethereum price drifted lower on Wednesday as its correlation with the Dow Jones and the Nasdaq 100 indices continued. The coin dropped to a low of $1,964, which was its lowest level this week. It was a sea of red as other cryptocurrency prices nosedived.
Don’t fight the Fed
The price of ETH declined sharply as market volatility continued. The closely watched CBOE Volatility Index rose more than 5%.
There were several catalysts for this volatility. First, investors were reacting to the statement by Jerome Powell on Wednesday during an event sponsored by Wall Street Journal. In it, he reiterated that inflation was the biggest challenge facing the economy. He then reiterated that the Fed would do whatever it could to push inflation towards its target of 2.0%.
Investors therefore believe this means the bank will not come to its rescue as it did in 2018 and during the Covid pandemic. As such, he will continue to raise interest rates by 0.50% in the remaining meetings. It will also begin a period of quantitative tightening. As such, Ethereum’s price is falling as investors avoid battling the Fed.
US stocks correlation
ETH price is also crashing as the correlation with American stocks continues. The Dow Jones declined by more than 1,100 points while the tech-heavy Nasdaq 100 index declined by more than 560 points.
The decline was triggered by relative weakness in the retail sector. Target’s stock price crashed more than 25% while Walmart fell more than 10% after the companies posted weak quarterly results.
Their results showed that the biggest American companies were seeing wage inflation affect their businesses. As such, the trend could continue in other sectors of the economy.
Over the past few months, there has been a strong correlation between US stocks and cryptocurrencies like Ethereum.
