Ethereum price drifted higher after CPI but downside risks remain

Ethereum (ETH/USD) price crawled back slightly on Tuesday after the US published stronger-than-expected January inflation figures. The coin jumped to $1,525, which was a few points above the year-to-date low of $1,465. 

Inflation was higher than expected

Ethereum and other risky assets like American stocks drifted higher even after the US released stronger-than-expected inflation numbers. As I wrote here, inflation rose to 0.5% in January from December and by 6.4% on an annual basis. This decline was lower than the median estimate of 6.2%. 

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Therefore, there is a high possibility that the Federal Reserve will maintain its bullish posture when it meets in March. Officials like Jerome Powell, Raphael Bostic, and Neel Kashkari have all expressed hopes that the bank will continue hiking in the coming months.

This view is reinforced by the fact that inflation remains stubbornly above the Fed’s target of 2.0%. At the same time, the bank has achieved its goal of lowering the unemployment rate. Data published earlier this month revealed that the jobless rate plunged to a five-decade low of 3.4%.

Therefore, there is a likelihood that Ethereum price comeback will fade after the initial jump. Historically, its price tends to underperform in an extremely hawkish environment.

Regulatory concerns remain

Ethereum price is also at risk because of the ongoing regulatory risks. Last week, American authorities settled with Kraken, a leading exchange about staking. The SEC accused Kraken of offering regulated products without being a regulated company. Kraken paid $30 million to settle the claims. 

Therefore, this means that all crypto exchanges offering their services in the US will need to be regulated. This is important for Ethereum since it opened staking capabilities after the Merge event that happened in 2022. 

In another regulatory crackdown, New York authorities ordered Paxos to stop minting Binance USD, a leading stablecoin. These regulatory issues will likely continue in the coming months as agencies apply lessons learned after the collapse of FTX. 

Therefore, the outlook of Ethereum’s price is still bearish, with the next point to watch being at $1,400. As shown in the chart above, ETH formed a triple-top pattern at ~1,700 level.