Fed’s Quantitative Easing to Affect ETH/USD Pair in The First Half of 2025: How?

In previous discussions, many pointed out the sensitivity of the ETH/USD pair to Federal Reserve policies, particularly around quantitative easing (QE).

Benjamin Cowen noted that if the Fed announces no immediate QE plans earlier, it could trigger a downturn for Ethereum, sending it reeling towards lower support levels.

This move could bring about a situation where, in response, the Fed could reconsider its stance by March 2025, potentially initiating a quick recovery for ETH.

Historically, ETH struggled to break the $4,000 barrier over the last few years, showing a pattern of allergic reactions to this price point.

Notably, Ethereum saw significant capitulations in April and August, correlating closely with the Bank of Japan’s rate hikes in March and July, respectively. The pattern suggested that ETH tended to hit capitulation lows the month following BOJ rate adjustments.

Last week, following another BOJ rate hike, speculations arose about a potential capitulation low for ETH in February or March. If Ethereum manages to stay above its Bull Market Support Band (BMSB), this downturn scenario might not unfold.

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However, a break below this level could trigger another steep decline towards the regression band, echoing past cycles where ETH/BTC bottomed out as QE began.

This crucial perspective on how Fed’s decisions on quantitative easing in the first half of the year could significantly influence the ETH/USD pair.

New ATH in Ethereum ecosystem

On the other hand, Layer 2 (L2) networks saw a new all-time high in distinct weekly active addresses last week, soaring to 10,942,006, marking a 24.9% increase. Among these, 580,853 were active across multiple L2s, reflecting robust cross-chain engagement.

Ethereum Layer 1 also saw substantial activity with 2,458,330 addresses. Base and Arbitrum One led the surge, contributing significantly to this growth. Base led with 6,762,005 while Arbitrum One had 1,931,903.

Multiple L2s reported 580,853, while Taiko had 333,109. Gravity recorded 221,127, OP Mainnet 207,929, and World Chain 152,774. Linea posted 143,065, Manta Pacific 120,432, and Mantle 112,223. Other chains contributed a collective 376,404 addresses.

The engagement didn’t stop at user activity; over 10,000 contracts deployed to the Ethereum ecosystem in 24 hours as of press time signaled strong developer interest and commitment to building on-chain solutions.

This flurry of activity showed the expanding adoption and integration of Ethereum and its L2 solutions, which enhances the network’s scalability and overall ecosystem vitality.

This growth indicates a vibrant future for the Ethereum network, suggesting a continuing upward trajectory in both development and user engagement.

As these trends persist, they solidify Ethereum’s foundation for future on-chain innovations, further cementing its position at the forefront of the blockchain industry.

Stablecoins (USDT & USDC) on ETH/USD v SOL

Finally, over the past week, stablecoin holdings on Ethereum surged by $2.06 Billion, closely followed by Solana with a $2.04 Billion increase.

These gains reflected significant liquidity inflows and could enhance the stability and utility of both networks during market downturns. Other notable changes included Tron and Avalanche, with increases of $385 Million and $353.37 Million respectively.

Base and Hyperliquid also saw substantial rises, adding $193 Million and $109 Million. These shifts suggest growing trust in these platforms for stablecoin transactions.

For Ethereum, particularly, this influx in stablecoins, notably during its price downturn, could cushion against volatility, supporting its valuation and providing a platform for recovery.