Ether (ETH), the Ethereum blockchain’s native token, has seen its biggest monthly price drop since March 2020, tumbling alongside Bitcoin in one of the worst-ever starts to a year in cryptocurrency markets. Ether (ETH) is down 31% in January, while Bitcoin (BTC) is down 22%.

The sell-off also claimed some of the hottest tokens from 2021, erasing half or more of their market value in several cases. In January, Terra’s LUNA fell by 50%, Solana’s SOL fell by 49%, and Avalanche’s AVAX fell by 42%.

According to Denis Vinokourov, head of research at Corinthian Digital, Bitcoin’s dominance ratio – its share of total crypto market capitalization – is around 42 percent, having dropped below 39 percent in mid-January. Last year at this time, Bitcoin held a 62 percent share of the market.

According to the data, the past year’s rapid rise in altcoin relative valuations has recently reversed amid the broader sell-off in crypto markets, with the highest flyers suffering the most losses. 

According to data from Defillama, Ethereum has also continued to lose its lead in decentralized finance (DeFi), where it has a 59 percent market share. The smart-contract blockchain’s prowess in DeFi fell to an all-time low of 57 percent earlier this month.

Fed Rate Hikes Are Imminent

Because of Ethereum (ETH) and its vulnerability to macroeconomic trends, the possibility of Ether reaching $2,000 in the coming months grows even more. The positive correlation efficiency between the Ethereum token and Bitcoin has been 0.92 in the last 30 days. Therefore, the dip in Bitcoin price also triggers a dip in Ethereum. 

The Federal Reserve’s monetary policy is at the heart of the aforementioned bearish outlook. In particular, the US central bank’s decision to withdraw its $120-billion-per-month COVID-19 stimulus program by early March and raise benchmark rates from near-zero levels after that has begun to hurt the so-called pandemic winners – tech stocks, gold, and Bitcoin. 

Thus, the Fed’s hawkish monetary policy adds pressure on ETH/USD. Considering a dip in the overall crypto market, the ETH/USD pair is also taking a bearish turn. However, the technical outlook seems bullish now.

Ethereum (ETH/USD) – Technical Outlook

Although the fundamentals are bearish, the technical side of the market has turned bullish. ETH/USD has violated the double top resistance level at $2,650 level. With this, the chances of uptrend continuation remain strong. 

The crypto pair may find an immediate resistance at 2,800 and 2,890 level. A break above this opens further room for buying until 2,976 level, whereas the support stays at 2,656 level.

The MACD also supports buying trend, so the idea is to take buy trades over the $2,650 level to target $2,800. Good luck!