Even as Bitcoin finds some buoyancy following a better-than-expected U.S. inflation report, Ethereum has been lagging behind.
Since the new CPI report landed early Wednesday, the Bitcoin price has gained 3% as it holds key support levels. Meanwhile, the Ethereum price has been playing catch up, seeing a 0.5% gain, Coingecko data shows.
Tracy Jin, vice president of crypto exchange MEXC, told Decrypt that a successful implementation of Ethereum’s Petra upgrade could significantly strengthen the fundamentals of the second-largest blockchain.
If the upgrade resolves issues with network throughput and transaction costs, she said, it could enhance Ethereum’s appeal and drive demand for ETH to Jin. Just yesterday, Ethereum devs achieved finality on the Holesky testnet—buffeting hopes that the Petra upgrade won’t be delayed much longer.
“Under favorable conditions, ETH may reach $6,000–7,000 this year,” Jin said.
But she was careful to add that none of the major Ethereum upgrades have been without technical difficulties, delays, or changes. Jin said there’s a “high probability” that as devs continue work towards the Petra upgrade, it could leave ETH vulnerable to “increased volatility” for the next 3-6 months.
“In conditions of uncertainty, investors often seek refuge in safer assets, like the U.S. dollar, which leads to decreased interest in risky assets, including cryptocurrencies,” she added.
Even as President Donald Trump’s trade wars continue to spark uncertainty in the markets, the most recent U.S. CPI report has improved hopes that the Federal Reserve may enact at least one interest rate cut in the first half of 2025.
It’s usually the case that when inflation shows signs of cooling, the chances of a rate cut could increase, providing a bullish signal for digital assets. And after this morning’s better-than-expected CPI print, markets are pricing in a 55% chance of seeing a rate cut in June, according to the CME FedWatch Tool.
Even if there’s been a recent rebound, institutional investors continue to pull back from cryptocurrencies. Bitcoin ETFs have seen outflows of $371 million and Ethereum ETFs witnessing $22 million, per Farside Investors data.
“This trend reflects broader weakness in risk assets, with markets still searching for fresh liquidity to reignite momentum,” Valentin Fournier, an analyst at BRN, told Decrypt.
Fournier noted that despite the bearish market sentiment, the stabilization of digital assets like Bitcoin and Ethereum at key support levels is encouraging.
“In the near term, decisive action from the U.S. government could be the key driver to push Bitcoin back toward its previous all-time high,” Fournier noted.
Edited by Stacy Elliott.