Tom Lee Says Ethereum Will Rise When Oil Falls — And It All Comes Down To Fed Policy

• Fundstrat’s Tom Lee said Ethereum is now trading inversely to oil prices because higher crude prices increase inflation and raise the likelihood of Federal Reserve rate hikes.
• His comments come as Ethereum and the broader cryptocurrency traded lower on Thursday morning on reports that Iran ordered enriched uranium to remain inside the country, leading to a surge in oil prices.
• According to Lee, the Iran war will decisively impact oil prices, and thus, the direction of the cryptocurrency market.

Tom Lee, Fundstrat investment chief and Bitmine Immersion Technologies (BMNR) chairman, said on Thursday that Ethereum (ETH) is now trading inversely against oil prices after the leading altcoin fell alongside a broader crypto pullback triggered by surging crude prices.

“The April FOMC minutes highlight why ETH is inversely correlated oil at the moment,” he wrote in a series of posts on X, noting that the committee stated that there could be a need for ‘policy firming’ if inflation persists above the 2% mark. “Higher oil is pushing up inflation, thus higher oil equals higher probability of Fed hikes.”

Oil Prices And Fed Expectations Pressure Crypto

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%.

Headline inflation rose 0.6% in April and 3.8% year-over-year, matching economist forecasts. However, both headline and core inflation remain above the Federal Reserve’s long-term 2% target.

Lee stated that since the start of the Iran war, oil prices and expectations for future Fed rate hikes have largely moved together, while crypto assets have reacted in the opposite direction. “ETH and crypto prices are linked to monetary liquidity,” he wrote. “Thus, crypto will be inversely correlated to oil.”

Ethereum Falls While Oil Climbs Above $100

Ethereum’s price fell 0.8% in the last 24 hours as oil prices climbed back up over $100 on reports of Iran ordering enriched uranium to stay inside the country. Retail sentiment around the leading altcoin trended in ‘bearish’ territory over the past day, with chatter at ‘normal’ levels. 

The United States Oil Fund (USO) climbed 2.5% in morning trade to over $147. West Texas Intermediate crude futures rose 2.9% to $101.04 per barrel, while Brent crude gained 2.3% to $107.36. Meanwhile, the overall cryptocurrency market edged 0.5% lower, while Bitcoin (BTC) slipped below $77,000. 

“The resolution of this war will decisively impact oil prices,” Lee said. BMNR’s stock fell nearly 2% in morning trade on Thursday, but retail sentiment around the Ethereum-backed digital treasury on Stocktwits remained in ‘bullish’ territory over the past day. Chatter stayed at ‘extremely high’ levels.

Read also: Bitcoin, Ethereum Slip After Nvidia Earnings While Oil Surge Spooks Markets

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