Ether (ETH) saw a partial recovery on May 2nd after experiencing a significant decline. The cryptocurrency had dropped by 14.2% from April 28th to May 1st, hitting a low of $2,817. This decline coincided with $162 million in leveraged long liquidations, indicating investor anxiety.
However, on May 2nd, Ether managed to climb 6.4%, approaching the $3,000 mark.
This rebound occurred despite broader economic concerns. Persistent inflation in the United States, along with weak 1.6% growth in the first quarter, dampened investor sentiment. Additionally, interventions by the Bank of Japan to stabilize the yen and a modest 0.4% annual growth in the Eurozone increased risk aversion. This cautiousness extended beyond cryptocurrencies and impacted other asset classes.
For example, WTI oil prices fell to a 50-day low of $78.18 on May 2nd. Similarly, commodities like copper and wheat experienced declines of 4.4% and 3.2% respectively since April 29th. The cryptocurrency market as a whole faced setbacks, including the first-ever net outflow from the BlackRock Bitcoin spot exchange-traded fund (ETF) on May 1st.
This outflow, totaling $1.2 billion over six trading days starting April 24th, indicated a withdrawal of institutional interest from Bitcoin spot ETFs. This lack of enthusiasm is particularly concerning as the U.S. Securities and Exchange Commission (SEC) approaches its decision deadline on the VanEck Ethereum ETF requests by May 23rd.
However, a contrasting picture emerged in Hong Kong. Despite the declining demand for U.S. spot Bitcoin ETFs, Hong Kong launched its own spot cryptocurrency instruments on April 30th. These instruments, especially the spot Ethereum ETFs, experienced net inflows of $44 million on the first trading day, indicating a localized appetite for such products. While the volume is relatively small, it highlights the difference in market dynamics between Hong Kong and the U.S.
A surge in Ethereum network activity played a crucial role in boosting Ether’s price and investor confidence. The weekly volume of decentralized applications (DApps) on Ethereum increased by 15% to $42.2 billion, outperforming its competitors significantly. In contrast, BNB Chain experienced a 20% decrease, and Solana saw a 6.5% contraction in DApp volume during the same period.
This increase in activity was further supported by a 29% rise in the number of active addresses on the Ethereum network over the same week. On the other hand, BNB Chain and Solana witnessed declines in active addresses. The user growth on Ethereum was primarily driven by applications like Xterio, EigenLayer, and Zerion.
Adding to the positive sentiment were comments from U.S. Federal Reserve Chair Jerome Powell. These comments were made after the Federal Open Market Committee (FOMC) meeting on May 1st. Powell suggested that interest rates may have reached their peak at 5.5%, which generally benefits assets like cryptocurrencies. While investors anticipate a potential rate cut in the coming months, possibly extending into the first half of 2025, the immediate relief stems from the Fed potentially slowing down its tightening measures.
This could decrease the appeal of fixed-income investments compared to inflation, potentially pushing investors towards riskier assets like Ether in the long run. For now, Ether investors are cautiously optimistic that the worst of the central bank’s liquidity tightening may be over.
