Ethereum price drifted lower on Wednesday as its correlation with the Dow Jones and the Nasdaq 100 indices continued. The coin dropped to a low of $1,964, which was its lowest level this week. It was a sea of red as other cryptocurrency prices nosedived.
Don’t fight the Fed
ETH price declined sharply as volatility in the market continued. The closely-watched CBOE volatility index rose by more than 5%.
There were several catalysts for this volatility. First, investors were reacting to the statement by Jerome Powell on Wednesday during an event sponsored by Wall Street Journal. In it, he reiterated that inflation was the biggest challenge facing the economy. He then reiterated that the Fed would do whatever it could to push inflation towards its target of 2.0%.
Therefore, investors believe that this means that the bank will not come to its rescue like it did in 2018 and during the Covid pandemic. As such, it will continue hiking interest rates by 0.50% in the remaining meetings. It will also start a period of quantitative tightening. As such, Ethereum price is falling as investors avoid fighting the Fed.
Read our Ethereum price prediction.
US stocks correlation
ETH price is also crashing as the correlation with American stocks continues. The Dow Jones declined by more than 1,100 points while the tech-heavy Nasdaq 100 index declined by more than 560 points.
The decline was triggered by the relatively weakness in the retail sector. The Target stock price crashed by more than 25% while Walmart fell by more than 10% after the firms published weak quarterly results.
Their results showed that the biggest American companies were seeing wage inflation affect their businesses. As such, the trend could continue in other sectors of the economy.
In the past few months, there has been a close correlation between American stocks and cryptocurrencies like Ethereum.