Ether’s Major Software Update and Potential SEC Scrutiny

The past few months have been challenging for the cryptocurrency market, with major digital currencies facing significant selling pressure due to hawkish central bank signals and uncertainties stemming from the ongoing Ukraine crisis.

The potential for Ether and the broader cryptocurrency market to rise remains limited, particularly if the U.S. Federal Reserve decides to raise interest rates by 75 basis points or more at its upcoming meeting. Goldman Sachs analysts recently forecast that the Fed may accelerate rate hikes due to recent economic data, while Nomura analysts believe the inflation data could trigger a massive 100-basis-point hike.

There are growing concerns that such aggressive rate hikes could lead to a larger sell-off. As a result, Ether (ETH) may struggle to maintain its current price levels. It’s important to note that the cryptocurrency market tends to move in tandem with the stock market—any downturn in equities is often mirrored in the crypto space.

Salah-Eddine Bouhmidi, Head of Markets at I.G. Europe, predicts that Bitcoin could fall to $13,500 by year-end. If that happens, Ether would likely dip below $1000.

Conversely, Ether’s significant software update last week may attract attention from the SEC, particularly after SEC Chairman Gary Gensler stated that cryptocurrencies that enable users to “stake” their coins may pass a key test determining whether an asset is considered a security. This is based on the Howey test, which looks at whether investors expect returns from third parties’ efforts.

Prior to last week’s shift to the proof-of-stake model, Ether used the proof-of-work model—similar to Bitcoin’s. Staking is a method used by some of the largest cryptocurrencies, including Solana, Cardano, and Ether, allowing investors to lock their tokens for a set period in exchange for returns.

There is growing competition among federal agencies and congressional committees over jurisdiction of crypto regulation, with the crypto market generally preferring not to be governed by the SEC.

The SEC is known for its stringent disclosure requirements, which crypto firms argue are costly and impractical. As a result, many firms have spent millions lobbying Congress to support their interests.

Technical Overview of Ether

Ether has dropped from $1789 to $1281 since September 11, 2022, and the current price sits at $1337. It may struggle to hold above $1200 in the coming days. A break below this level could lead to a potential dip to $1000.

The chart below shows a trendline. As long as the price of ETH remains below this line, we cannot expect a trend reversal, meaning the price remains in the SELL-ZONE.

Key Support & Resistance Levels for Ether

From the chart (dating from March 2022), key support and resistance levels are marked, helping traders gauge potential price movements. Ethereum remains in a “bearish phase,” but should the price climb above $2000, it could signal a trend reversal, with the next target around $2300. The current support level is $1200, and if breached, it would be a SELL signal, opening the door to $1000. If the price falls below $1000—an extremely strong support—then the next target could be around $800.

Factors Supporting an Increase in Ether’s Price

Ether surged nearly 100% from $1032 at the start of July, peaking at $2029 on August 14. This rapid price rise saw Ether testing the $2000 mark multiple times, but it was unable to stabilize above it. Currently, Ether’s price remains above the $1200 support level, but a drop below could indicate a move to $1000.

Surveys show institutional investors remain largely bearish on Ether, particularly due to concerns that the Federal Reserve’s aggressive rate hikes could lead to a larger sell-off. Ethereum is still in a “bearish phase,” but if it climbs back above $2000, this could signal a reversal, with $2300 as the next target.

Indicators Suggesting Further Decline for Ether

Ether, along with most major cryptocurrencies, remains under pressure as analysts predict the Fed will accelerate its rate hikes based on recent economic data. This could cap the upside potential for Ethereum and the broader cryptocurrency market, particularly if the Fed raises rates by 75 basis points or more at its meeting this week.

A Reuters report indicated growing tensions in the global landscape, with Putin stating that the West is engaging in nuclear blackmail, adding to the geopolitical risks. Any escalation of tensions could negatively impact both global markets and cryptocurrency prices. Following such developments, European stock exchanges opened lower today, reflecting the heightened risk of nuclear conflict.

The key support level for Ethereum is at $1200. If the price drops below this level, a SELL signal will trigger, potentially taking Ether down to $1000. Should Ether fall beneath $1000—strong support—it may next target $800. Traders looking to go long or short on Ether can explore platforms like Kucoin.

Expert Predictions for Ether’s Price

After Ether’s transition to proof-of-stake, bearish sentiment took hold of the market, though this wasn’t the sole cause of the price drop. Many investors are concerned that aggressive rate hikes by the U.S. Federal Reserve could trigger an even larger sell-off, making it difficult for Ether to maintain current price levels.

Goldman Sachs analysts have forecasted that the Fed will speed up its rate hikes, based on recent economic trends, while Nomura analysts expect new inflation data to prompt a 100-basis-point hike. Salah-Eddine Bouhmidi, Head of Markets at I.G. Europe, predicts that Bitcoin could fall to $13,500 by year-end, and if this occurs, ETH would likely drop below $1000.