ETH To AUD Forecast: Pivotal Moment In Market Rollercoaster

The crypto market has been on a rollercoaster ride over the past few years. Following the tumultuous events of 2022, which saw widespread declines and several high-profile collapses in the crypto space, the past two years has brought a welcome reprieve with a more positive market sentiment.

This year kicked off with significant momentum, marked by the approval of spot bitcoin exchange-traded funds (ETFs) in the United States and bitcoin reaching new all-time highs. This renewed enthusiasm spilled over into the broader crypto market, including Ethereum (ETH).

However, there has been more subdued price action across the board over the past few months. As of September 2024, the crypto market is at another pivotal moment with the introduction of spot Ethereum ETFs. One month in and investor inflows into the ETFs have been promising, with BlackRock’s iShares Ethereum ETF seeing over $US1 billion of investor capital make its way into the fund.

Ethereum, as the second-largest cryptocurrency by market capitalisation, continues to play a crucial role in the digital asset markets. Its performance not only reflects broader market trends but also significantly influences the sentiment of crypto investors towards the entire crypto space.

ETH’s Outlook in 2024

Financial markets are undergoing rapid movements, with cryptocurrencies in the spotlight. The first week of August was marked by financial armageddon, with crypto and stocks markets worldwide experiencing rapid drawdowns. The price of Ethereum fell by more than 34% and, one month later, is still 51% below its all-time high.

“This year is bringing many changes to the cryptocurrency market that could cause significant upheavals,” a market analyst at Conotoxia, Grzegorz Drozdz, tells Forbes Advisor.

Concerns about an impending recession in the United States, Federal Reserve decisions and changes in the Bank of Japan’s interest rate policy have contributed to this sharp depreciation. Drozdz adds: “The Bank of Japan’s departure from zero interest rate policy has significantly impacted the profitability of Japanese exporters, contributing to global declines.”

The increase in interest rates on the Yen has also put the popular ‘Yen carry trade’ stratagem in jeopardy, causing a mass unwinding of positions as large investors scramble to sell their assets to repay their loans. Many are also concerned about a recession in the US off the back of recent jobs data, with unemployment rising and new jobs cratering over the month of July.

Data from August appears to be slightly better, with unemployment dropping back to 4.2% and wage growth solid over the month. Markets reacted positively on the news, with all eyes now on the US Federal Open Market Committee (FOMC) scheduled for September 18, with investors expecting a rate cut of 25 basis points.

Despite the tough month, the cryptocurrency market still shows some signs of resilience, bouncing on the better jobs data report from August. Despite August’s massive price drop, the market capitalisation of stablecoins, which reflects the amount of money in the cryptocurrency market, remains at its highest level in two years.

“Investors have not yet withdrawn their funds on a large scale, which may suggest some confidence in the market,” Drozdz says.

However, changes in capital inflows and outflows from bitcoin ETFs are notable. Since the end of August, bitcoin ETFs have experienced consistently net negative capital flows, meaning that some ETF holders are divesting from the product. Drozdz adds: “Despite extremely optimistic forecasts from politicians like Donald Trump, the cryptocurrency market remains sensitive to global shocks.”

These shocks, while difficult to predict, may lead to further market fluctuations. Investors should therefore exercise particular caution and make decisions based on sound research rather than emotions.

“The situation in financial markets, especially in the context of cryptocurrencies, is currently very dynamic and uncertain,” Drozdz says.

Crypto to Fiat Currency: How Does the Price of AUD Affect Ethereum?

The link between digital coins like Ethereum and traditional money like the Australian Dollar (AUD) is more complex than it seems. It’s not just about how Ethereum is doing, it’s also about how the AUD is faring on the global stage.

As Drozdz explains: “In the case of Ethereum, when compared to the Australian dollar, the price of a cryptocurrency is not only dependent on sentiment towards the cryptocurrency itself, but also on the valuation of the Australian dollar in the markets.” So, the value of Ethereum in AUD depends on both how people feel about Ethereum and the global standing of the AUD.

Here’s an example: if the AUD weakens against other currencies, and people’s opinion about Ethereum stays the same, the AUD value of Ethereum would increase. In other words, for Australians, Ethereum would become more expensive, even if Ethereum itself hasn’t changed.

This connection is important for investors in Australia, or anyone trading in AUD. They need to watch not just Ethereum’s performance, but also the AUD’s.

And remember, it works both ways—Ethereum’s market performance can affect its AUD value, too. As Drozdz notes, Ethereum’s value doesn’t just reflect the AUD’s performance, but also depends on Ethereum’s own market standing. So, for effective trading, Australian investors need to keep an eye on both Ethereum and the AUD.

Related: Bitcoin to AUD Forecast

What Drives the AUD?

The Australian Dollar (AUD) is influenced by a mix of domestic and international factors. As Drozdz highlights, the AUD doesn’t exist in a vacuum; its value dances to the tune of economic indicators and global events.

A key factor that influences the AUD is commodity prices.

“Australia is a major commodity exporter, particularly of iron ore, coal, and natural gas,” Drozdz notes. When global commodity prices shift, the AUD often moves with them, due to Australia’s significant export earnings.

Interest rates also sway the AUD. These rates, set by the Reserve Bank of Australia (RBA), can make the AUD more or less attractive to investors. If Australia’s interest rates are higher than in other countries, this can boost the AUD as investors hunt for better returns.

Australia’s economic health is another influence on the AUD. As Drozdz points out, “Australia’s overall economic health and performance impacts the AUD.” So, strong GDP growth, low unemployment, and steady inflation can support the AUD, while weaker economic data could devalue it.

Finally, global economic trends also affect the AUD. Things like shifts in the world economy, geopolitical events, trade tensions, and changes in global monetary policy can all impact the AUD. Even how investors feel about other currencies, like the US dollar or Chinese yuan, can indirectly affect the AUD.

ETH to AUD: Six-Month Forecast

Predicting trends in the crypto world is a complex task, given the volatility of digital assets. Yet, understanding potential trends and influences can guide investors through this turbulent landscape.

Discussing the possible trends for ETH to AUD in the next six months, Drozdz underscores the significance of broader economic indicators. He states: “Factors that seem to be driving the broad cryptocurrency market at the moment include the likelihood of a recession in the US.”

Changes in interest rates, especially in economies such as the US, can have an impact on the cryptocurrency market. While in the long term, lower interest rates are typically positive for risk assets like stocks and crypto, in the short term interest rate cuts do not spell good news as the decision to drop rates is often made in order to avoid a recession.

The July US jobs data came in significantly worse than expected, creating concerns about a recession in the US, which has had a ripple effect on global markets, including crypto.

Yet, as Drozdz cautions, “Due to the lack of clearly defined fundamentals for the cryptocurrency, it is very difficult to predict what levels will be reached in the future.” The price of Ethereum, like other cryptocurrencies, is often driven by a shifting market sentiment, which can change quickly.

In the short term, ETH’s value, especially against AUD, seems largely driven by market sentiment. Looking forward to the next six months, both investors and observers should watch global economic trends, particularly US economic data and financial markets, and shifts in sentiment towards Ethereum.

Balancing these factors can give a clearer view of the crypto market, aiding decision-making in this fast-paced sector.

ETH to AUD: 12-Month Forecast

Predicting cryptocurrency prices for a long-term horizon, such as a 12-month period, involves a thorough evaluation of many elements. These range from broad economic indicators to specific factors related to Ethereum, like network upgrades and adoption rates. Drozdz’s insights are valuable in this context, providing a roadmap for possible trajectories over the next year.

Drozdz emphasizes that capital flows into the new spot ETH ETFs is a new key influence on Ethereum’s value. As investors buy into the new ETFs, managers must buy ETH off the open market to maintain a 1:1 backing for ETF shares, creating additional demand for Ether which could positively influence price.

It is well known that changes in financial markets, especially in major stock exchanges, can have ripple effects on the crypto market. Changes in interest rate policies in major economies like the US can also significantly impact the crypto market.  If rates are cut as expected in the next FOMC meeting, it may spell short term price volatility for major stock markets and, therefore, crypto.

However, in the long term it could have a positive influence on prices as investors search for higher returns further out on the risk curve.

However, crypto markets are known for their crazy price swings, which can go both up and, of course, down. Echoing Drozdz’s sentiment, predicting exact levels that Ethereum might reach in the future is challenging due to this unpredictability. This sense of uncertainty becomes more pronounced over a longer period, especially with the global economic outlook remaining so uncertain.

Ethereum’s price will likely continue to be shaped by a mix of global economic factors, changes in the value of the AUD, and attitudes towards Ethereum itself. On the Ethereum-specific front, significant developments like successful network upgrades or increased adoption rates could also impact its value.

While precise predictions for the ETH to AUD pair over the next 12 months are difficult, keeping an eye on key influencing factors can help investors navigate this dynamic field. As always, staying informed and weighing potential risks and rewards before making investment decisions is key.

This article is not an endorsement of any particular cryptocurrency, broker or exchange nor does it constitute a recommendation of cryptocurrency as an investment class.