Why did the price of Ethereum (ETH) rise today?

Ethereum’s native token, ETH (ETH), rose to three-week highs, rallying closely with the broader cryptocurrency market, as well as stocks.

The price of Ethereum is rising to a three-week high

On January 9, ETH price rose 2.85% to surpass $1,325 for the first time in three weeks, a key level that could pave the way for the token towards $1,350 next if its previous price performance is any indication.

The crypto market capitalization increased by 2.66%, or $21.18 billion, in the same period.

ETH/USD daily price chart. Source: TradingView

Inflation cooling boosts the price of Ethereum

Investors are rushing into riskier markets amid signs of slowing inflation.

Notably, on January 6, the US Labor Department’s Nonfarm Payrolls report showed a slowdown in wage increases, which market observers interpreted as a sign that the Fed’s hawkish policy has succeeded in bringing down inflation.

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Such a scenario could prompt the Fed to slow down the pace of its rate increases, which in turn could prove the rise of crypto-assets like Ether.

The market is now awaiting new data on consumer prices in the United States on January 12th. The numbers will set the tone for the two-day FOMC meeting that begins on January 31. CME data shows market consensus for a 50-75 basis point price hike entry in February.

Ethereum options traders are betting on a 160% rise in ETH

As the macro indices turn into a short-term bullish trend for the risk markets, Ethereum options traders have grown confident about a possible price hike in the first quarter of 2023.

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Notably, open interest on Ethereum for contracts expiring March 31 is mostly bullish, with most of the hit targets falling within the $3,500 to $4,000 range, according to data tracked by Glassnode.

Ethereum options unlock interest via the strike price. Source: Glassnode

The bullish outlook is further supported by Jiang Zhuoer, CEO/Co-Founder of Bitcoin (BTC) mining service B.TOP, who Believes Ether will break out permanently from its current lower range anywhere between March and May 2023, pointing to the deflation on display in recent months.

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“Looking at the data for Ethereum, the inflation rate was 3.59% when ETH was in proof of work (POW). Bitcoin inflation rate is 1.72%,” he wrote, adding:

Even after the bear market, with the inactive coin being burned, the inflation rate for ETH is as low as 0.01%. […] From this data, we can conclude that the Ethereum bull market will start a spiral contraction mode.”

Ethereum’s supply rate after upgrading its network to Proof of Stake (PoS). Source: Ultrasound.Money

However, the Fed will need to see a sustained decline in inflation before it curbs its rate-raising spree, warns Edward Park, chief investment officer at Brooks Macdonald in London.

If this does not happen, investor sentiment may fall back towards risk again, which could lead to Ether returning below $1000 in such a scenario, which could form a double bottom.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.