Despite Ethereum’s past positive performance in the first quarters, it currently faces challenges. The altcoin has undone nearly half of its gains from the ‘Trump pump’ and experienced a 4% decline in January.
Analyzing the situation, crypto expert Benjamin Cowen suggests that the impending Federal Reserve rate decision and guidance could determine Ethereum’s future trend. A segment of Cowen’s assessment on X suggests,
“A potential risk for #ETH arises if the Federal Reserve announces no quantitative easing this week, which might lead to a downturn for ETH against the USD. However, a subsequent policy reversal by the Fed in March 2025 could prompt a rapid recovery for Ethereum.”
In this context, quantitative easing (QE) refers to a phase where the Federal Reserve increases the money supply and dollar liquidity in the market.
Overall, QE tends to fuel investments in riskier assets, including cryptocurrencies. Despite the continuous interest rate cuts since September, there hasn’t been a shift towards QE so far.
Ethereum Performance in Q1: Can Historical Trends Repeat?
Historically, the first quarter has been the most favorable for ETH, with average gains of around +80%.
Looking at monthly performance, January and March have typically delivered significant returns, averaging at 20% and 22% respectively.
However, recent data for January 2025 indicates a potential negative outcome. Since 2016, Ethereum has observed only one bearish February and faced challenges in March on two occasions.
If historical patterns prevail, optimistic expectations may shift towards the following month or March.
Nevertheless, the Options analytics platform Amberdata highlighted the risk associated with Ethereum, noting that traders estimated only a 15% probability of ETH surpassing $5K by June.
Additionally, the price could witness a sudden surge if the U.S. government utilizes it for monitoring government expenses. A segment from Amberdata’s weekly report stated,
“Elon Musk is exploring the integration of Blockchain technology into Dogecoin (either DOGE coin or perhaps Ethereum L1 or L2… Potentially SOL?). The exact direction remains uncertain. An unexpected announcement related to Ethereum could propel its value significantly higher within a short period.”
In essence, there exist two potential catalysts for Ethereum’s bullish movement in the short term, warranting close observation for validation.
Furthermore, Cowen highlighted that the ETH/BTC ratio might hit a low point if there is a shift towards quantitative easing. Despite brief surges in November and January, the pair has declined to 0.03.
This ratio reflects Ethereum’s price performance relative to Bitcoin.
A potential rebound indicating Ethereum’s strength would occur if the pair rises above the moving average; however, the realization of such a recovery is yet to be seen. At present, Ethereum is valued at $3.2K.