Ethereum price retreated on Friday as investors turned their focus to the bond market. Ether dropped to a low of $4,365, which was substantially lower than this week’s high of $4,860. At the same time, the VIX index and the fear and greed index have all jumped.
US bond yields bounce back
Bitcoin and Ethereum prices declined sharply on Friday as investors focused on the rising bond yields. The US 10-year bond yield jumped by 1.53% to 1.58%, the highest level in a few months. At the same time, the closely-watched 30-year bond yield rose to 1.927%.
The same trend happened in other major economies. For example, in Australia, the 10-year yield rose to 1.85% while in the UK, the yield of the 10-year gilts rose to 0.92%.
The reason for this is that investors are wondering about the rising inflation. Data published this week showed that inflation in most countries has jumped substantially. For example, in the United States, the headline consumer price index (CPI) jumped from 5.6% in September to 6.2% in October. This was the highest level in 31 years.
Meanwhile, in Germany, the headline inflation jumped to a 30-year high of 4.5%. The same is true in Spain, where data by the statistics office showed that the country’s inflation rose to 5.8%.
Therefore, while Ethereum is a good inflation hedge, investors are worried about a synchronous period of interest rate hikes. In the United States, the Federal Reserve has already started tapering asset purchases. In Europe, the ECB also cautiously started unwinding its pandemic response.
As such, investors have started rushing to the safety of bonds and the US dollar. Still, there is a sense in which investors are still getting greedy. The S&P 500 fear and greed index has soared to the extreme level of 81. At the same time, the Bitcoin fear and greed index is at 74.
The four-hour chart shows that Ethereum price has been slapped in the face in the past few days. The coin has dropped by about 5% from its highest level this week. Still, the coin remains between the ascending channel that is shown in purple. It is slightly above the upper side of the channel.
The bullish trend is also being supported by the 50-day and 100-day moving averages. It is also between the 0% and 23.6% Fibonacci retracement level.
Therefore, Ethereum price will likely remain in a bullish trend as long as it is above the two moving averages. A major downward trend will be started if the price moves below the lower channel and the 23.6% retracement level.
