Ether’s New Highs Driven by Rising Inflation Can Be A Starting Point of An “Accelerating Rally,” says Goldman Sachs
Crypto assets have been trading in line with inflation breakeven since 2019, said Goldman Sachs in a recent note to its investors.
Much like all the assets, inflation is driving the crypto market upwards, wrote the bank’s Global Markets managing director Bernhard Rzymelka. And if the inflation pressures continue to persist, crypto assets will keep on seeing their prices skywards.
To Goldman, one particular crypto is looking primed to rise into the stratosphere. This crypto is the second-largest cryptocurrency Ethereum, which hit a new all-time high on Friday at $4,468.
Ether rising to new highs, just shy of $4,500, is “either a sign of exhaustion and peaking… or a starting point of an accelerating rally upon a break higher,” reads the report. While this recent surge appears to be stretched, “the RSI has yet to hit the overbought levels seen at past market highs,” it added.
Up 6.4% in the past week and 490% YTD, Ether has outperformed Bitcoin, which is only up 1% in the last 7-days and 114% year-to-date. BTC -0.54% Bitcoin / USD BTCUSD $ 60,649.61
-$327.51-0.54% Volume 36.86 b Change -$327.51 Open $60,649.61 Circulating 18.86 m Market Cap 1.14 t 4 h Ether’s New Highs Driven by Rising Inflation Can Be A Starting Point of An “Accelerating Rally,” says Goldman Sachs 5 h Bitcoin Miner Revenue Jumps to 6 Month High, Mining Difficulty Records 8th Consecutive Increase of 7.85% 8 h Not an “Aggressive Buy” At Bitcoin’s High Price, But It Is Indication of A “Crisis Moment,” says Tech Billionaire Peter Thiel
For Ether, the rise of decentralized finance (DeFi) sector, which has $164.26 bln of total assets locked (TVL), and non-fungible token (NFT) mania are the driving forces.
Additionally, 75,200 ETH, worth more than $2.5 billion, have been burned ever since the London upgrade in early August. Last week, the rally of SHIB token also helped burn more Ether tokens as volatility led to a spike in the fees on the Ethereum network, further helping drive Ether prices higher as well. SHIB 8.61% SHIBA INU / USD SHIBUSD $ 0.00
$0.008.61% Volume 8.37 b Change $0.00 Open $0.00 Circulating 10 t Market Cap 38.7 b 4 h Ether’s New Highs Driven by Rising Inflation Can Be A Starting Point of An “Accelerating Rally,” says Goldman Sachs 3 d Web 3 and DeFi Dominates Coinbase Investment in Q3, Hits Top Spot on Apple’s US App Store 3 d Bitcoin Market Is Not as Leveraged as it Looks, Gas Spikes as Ether Hits a New ATH
Goldman Sachs sees Ether surging as high as $8,000 in the next two months if this historical correction with inflation persists going forward.
The backdrop for Ethereum looks supportive as “it has tracked inflation markets particularly closely, likely reflecting the pro-cyclical nature as “network-based” asset,” said Rzymelka.
“The latest spike in inflation breakevens suggests upside risk if the leading relationship of recent episodes was to hold.”
The banking giant cautioned US inflation swaps implying core PCE inflation at or above 2.5% for the next five years, which is a lot of overheating. In reaction to this, the market expects the Federal Reserve to announce the tapering of asset purchases at this week’s policy meeting.
But again, “this lines up rather well with the Ethereum chart, suggesting a late-stage rally with longer-term market top ahead,” said Goldman.