Morgan Stanley Says Ether Underperformance Echoes Crypto Downturn of 2018
Expectations of higher Fed interest rates are weighing on crypto prices, the bank's analysts said.
:format(jpg)/cloudfront-us-east-1.images.arcpublishing.com/coindesk/6Y5SH2FLNZAHHGORM7BR7TQLIU.jpg)
Ethereum is underperforming bitcoin as the crypto market topples. (Shutterstock)
/arc-photo-coindesk/arc2-prod/public/LXF2COBSKBCNHNRE3WTK2BZ7GE.png)
U.S. dollar liquidity is being withdrawn from markets and expectations of higher Federal Reserve interest rates are hurting crypto prices, the report says.
Ether, the second-largest cryptocurrency, has dropped about 75% from its November peak, analysts led by Sheena Shah wrote.
“When the ETH/BTC relative cross falls, it is a sign that the broader crypto enthusiasm is waning” as money is being pulled out of the more volatile alternative coins, the note says.
Although ether’s price cycle in U.S. dollar terms is similar to 2018, the analysts noted that this time round it’s largely institutional investors driving sales. In 2018, the share of retail trading activity was much higher.
The crypto-equivalent of quantitative tightening has continued, the bank said, fueling BTC’s slide to below $28,000, an important technical level. Any investors who bought BTC in the last year are now at a loss, and there are no obvious technical levels to watch until about $19,500, the 2017 high, it added.
For stablecoins, “issuance is contracting quickly,” the report says, and that has contributed to leverage halving within the “decentralized crypto ecosystem” since the beginning of May, and the destabilizing of crypto derivative prices as they diverge from their underlying assets.
Disclosure
Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.
Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.