Ethereum’s price may drop soon as equities, commodities continue to see red
Tech stocks, essential commodities, treasury bonds and crypto have all continued to face immense bearish pressure in recent months.
- As investors continue to wean away from high risk assets amid the imminent possibility of a global recession, Ethereum's value may fall further.
- ETH's share of the digital asset sector currently stands at 14.32%.
- Circle's US dollar stablecoin USDC is fast approaching USDT's total market capitalisation.
After falling as low as AUD$1,450 (US$1,000) on 1 July, Ethereum has continued to garner positive price momentum, topping out at AUD$1,715 (US$1,164) yesterday before correcting once again. The asset is now in the green (+0.7%) for the week while trading at AUD$1,671 (US$1,134).
Ethereum's recent stability has been welcomed by crypto enthusiasts but experts see more downside for the digital currency. This is because fears of a looming recession have gripped markets across the board, including equities, commodities and crypto. To this point, the Dow Jones Industrial Average fell by 0.4% earlier this week, dipping by 700 points compared to just a day earlier.
The US Treasury market – whose bond offerings are considered to be the gold standard of low-yield, stable stores of value (SOV) – has seen its 10-year yield ratios fall by 0.088 percentage points to 2.818%, their lowest levels in many years. Ian Lyngen, analyst for BMO Capital Markets noted:
"It was not long ago that inflationary angst was the driver of the move in US rates. [That] has given way to the specter of a recession and the move lower in yields reflects precisely the prospect for a slowdown domestically, and globally."
Essential commodities like oil have slipped drastically in value as well. Saudi Arabia, the world's top exporter of petroleum and diesel announced a record hike in crude prices amid rising inflation fears and tightening supply. Robert Yawger, director for global banking giant Mizuho highlighted: "The market is getting tight and the only way you can explain that away is fear of recession in every risk asset,"
Oil, crypto and equities have been sinking in tandem recently as investors now brace for an imminent crash. This comes at a time when central banks across the globe continue to take drastic measures to curb soaring inflation rates. The euro bloc witnessed a further drop in its business growth during June while South Korea saw its inflation levels hitting a 24-year high as well.
USDC set to dethrone USDT as 2022's most popular stablecoin
Circle's native USD-pegged crypto, USD Coin (USDC), has gained a lot of ground against Tether (USDT) over the last 60 days. USDC's market supply has increased by a little over 8%, reaching a valuation of approximately AUD$82.5 billion (US$56 billion) as compared to USDT's AUD$97.2 billion (US$66 billion).
There have been many allegations of USDT tokens not being 100% backed by cash and other traditional assets. There are currently many short-sell bets (estimated to be worth hundreds of millions of dollars) that the stablecoin will soon fall below its intended $1 peg. Recently, USDT fell below its 1:1 ratio with the US dollar back in 2018 and then again in May during the Terra debacle.
Disclosure: The author owns a range of cryptocurrencies at the time of writing
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