Ethereum’s (ETH) consolidation over the past few weeks could end due to the upcoming FOMC meeting. While crypto markets may have already priced in the Federal funds rate remaining the same, comments from Fed chairman Jerome Powell could catalyze an Ethereum price crash below the $3,000 key psychological level.
Futures market data shows that $1.52 billion worth of long positions might get liquidated if the price slides below $3,000. Additionally, the spike in the supply of ETH on exchanges in the past ten days further supports a potential downtrend. The two-day Federal Open Market Committee (FOMC) meeting will decide the short-term directional bias for cryptocurrencies, including Ethereum.
How Will Ethereum Price React to FOMC?
The Fed’s two-day policy meeting is important since it sets the tone and influences the US stock markets and cryptocurrencies to continue their ascent or catalyze a sell-off. Hence, based on the Fed’s decision, the Ethereum price may rally or trigger a crash.
For example, reducing the rate cuts in 2025 from four to two was a hawkish move that triggered a sell-off in the US stock markets and cryptocurrencies.
Based on the FedWatch Tool, there’s a 99.5% chance that the Federal Funds Rate will remain unchanged around 4.25%-4.50%.
FedWatch Tool Target Rate Probabilities
However, investors must note that President Donald Trump has called for a reduction in inflation and more rate cuts. According to Reuters, on January 23, Trump stated:
“With oil prices going down, I’ll demand that interest rates drop immediately, and likewise they should be dropping all over the world.”
The Federal Reserve is an independent entity with a dual mandate to maintain price stability and ensure maximum employment. Trump’s comments should technically not influence the decision-making process. Jerome Powell is trying to maintain the Federal Reserve’s independence. When asked if the chairman step aside if Trump asked for his resignation, Powell firmly said “no.” Moreover, Powell has reiterated on multiple occasions that the Fed makes decisions based on data and not political pressure.
Regardless, if Jerome Powell decides to defy market expectations and cut interest rates to achieve the soft-landing of 2% interest rates, it could catalyze a risk-on sentiment, which could cause the broader crypto market. In such a case, Ethereum price prediction notes an optimistic outlook.
What ETH Investors Should Expect?
If the federal rate remains unchanged at around 4.25% to 4.50%, the markets could experience a short-term volatility spike.
If the Fed decides to cut interest rates in an unprecedented dovish stance, it could catalyze a risk-on sentiment, triggering an ETH price rally.
Key Ethereum Price Levels to Watch
From a technical perspective, the $3,057 support level is the first support level. Beyond this, CoinGlass data shows $3,011 is the next key level, where roughly $1.52 billion of liquidity is present. Hence, a breakdown of this support could cause a massive liquidation event.
ScreenshotETH Liquidation Map
Andrew Kang, a popular crypto investor, also shared a similar outlook.
“A lot of leverage on $ETH is vulnerable below 3k. $2,200 – $2,500 seems reasonable“
Supply on Exchanges Spike
The total supply of ETH on exchanges has spiked from 10.35 million on January 20 to 10.69 million as of January 29. Typically, investors send coins to exchanges to provide collateral or to sell in uncertain conditions.
ETH Supply on Exchanges
Considering the upcoming FOMC, spike in supply on exchanges, and the liquidity resting below $3,000, all point to a single outcome – a potential crash. If such an outlook does come to pass, it could be a great buying opportunity, especially if the Fed decides to cut interest rates.
On the other hand, if there are no rate cuts, then a drop here needs to be approached with caution. Under these conditions, investors need to watch for stability in Bitcoin price and recovery above $103K. If successful, it could indicate the start of a bullish outlook.
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