Ethereum Climbs After Five-Day Slide, But Wintermute Warns ETH Is ‘Wrong Asset’ For Current Macro Backdrop

• Ethereum rebounded slightly on Wednesday after five straight days of losses, though it remains one of the weakest-performing major cryptocurrencies over the past week.
• Spot Ethereum ETFs continue seeing persistent outflows, with investors pulling nearly $150 million from the products over the past two trading sessions.
• Traders are now closely watching Nvidia earnings and the latest Federal Reserve meeting minutes for the cryptocurrency market’s next major catalyst.

Ethereum (ETH) recovered in morning trade on Wednesday, but trading firm Wintermute stated that it is the “wrong asset for this macro” backdrop.

Ethereum’s price rose 0.5% in the last 24 hours to around $2,128 after five days in the red. Despite the marginal uptick, ETH remains one of the weakest-performing major cryptocurrencies over the past week, down roughly 8%, according to CoinGecko data. Among the top 10 digital assets by market capitalization, only Solana (SOL) has performed worse during that stretch.

Retail sentiment around the leading altcoin on Stocktwits trended in ‘bearish’ territory over the past day, accompanied by ‘normal’ levels of chatter. 

Many users of the platform were undecided whether the recovery is a technical bounce price or just a short squeeze.

Others were more optimistic that Ethereum’s price will climb higher.

Wintermute Flags Inflation, Macro Risks For ETH

In its latest market update, Wintermute said Ethereum weakness is showing up across both spot and derivatives markets. It noted that the ETH/BTC ratio slid toward 0.0275 while funding rates softened and implied volatility rose, sending bearish market signal.

The firm pegged the sharp reversal to hotter-than-expected U.S. inflation data, which triggered a broad repricing across global markets. Core consumer prices, excluding food and energy, rose 0.4% in April from the previous month, above Wall Street expectations of 0.3%. On an annual basis, core CPI increased 2.8%, also slightly above estimates of 2.7%.

Wintermute said markets are now pricing a 44% probability of a Federal Reserve rate hike by December, compared with roughly 22% a week earlier.“The conversation went from ‘when do they cut’ to ‘do they hike’ in five trading days,” the firm wrote.

Institutional flows have also deteriorated. Spot Ethereum ETFs recorded $255 million in outflows last week. According to SoSoValue data, redemptions have only increased this week. Ethereum ETFs clocked a total of $148 million in outflows over the last two days, with $86 million in daily total net outflows on Monday, followed by another $62 million exit on Tuesday.

Nvidia Earnings, FOMC Minutes Are Crypto Market’s Next Test

Wintermute said the structural long-term case for crypto remains intact, pointing to low exchange reserves and continued progress around the Digital Asset Market CLARITY Act. However, the macro backdrop will continue dominating price action in the near-term.

“The only things that worked were the things causing the inflation problem,” the firm wrote, pointing to surging oil prices and rising yields

Retail crypto investors are now watching for the Federal Open Market Committee (FOMC) minutes in the afternoon, and Nvidia (NVDA) earnings after the bell for the cryptocurrency market’s next move.

Read also: SpaceX, Palantir, Bitcoin Are Pricing The Same War — Just From Different Sides, According To 10x Research

For updates and corrections, email newsroom[at]stocktwits[dot]com