#Ethereum and the index of small-cap stocks in the USA, Russell 2000, shows an "almost mystical" correlation. Both assets are sensitive to interest rates, and analysts expect their joint growth amid possible four consecutive rate cuts by the Federal Reserve.
Strange synchrony of two markets
Analysts from the macroeconomic publication Milk Road noticed an unusual correlation between Ethereum and the Russell 2000 — an index tracking 2,000 small-cap publicly traded companies in the U.S. This index is widely used to assess the health of the U.S. economy.
«Unlike Bitcoin, Ethereum generates yield, and this is of immense significance in a world where rate cuts are not just priced in but practically guaranteed,» explained Justin d’Anethan, head of partnerships at Arctic Digital.
The Chicago Mercantile Exchange's futures market currently assesses the probability of another 0.25% rate cut at the Federal Reserve meeting on October 29 at 95.7%. The probability of an additional cut in December is 82.2%.
Technical analysis indicates a breakout
Ethereum and the Russell 2000 are also forming a 'cup with handle' pattern — a bullish continuation model indicating a period of consolidation before a breakout.
Michaël van de Poppe, founder of MN Fund, highlighted two factors that will lead $ETH to a new all-time high. First, the ETH/BTC trading pair has 'hit the bottom' and is ready for a new upward movement after a relatively standard correction. Second, gold is showing 'crazy parabolic growth,' reaching a peak above $4,000 per ounce, which signals an inevitable correction and 'the flipping of a big switch to risk assets.'
Capital rotation into risk assets
«If central banks around the world are moving into easing mode, there are strong reasons for capital rotation into risk assets with growth potential, and Ethereum fits that profile,» added d’Anethan.
Chart analyst Matt Hughes noted that 'Ethereum is ready for a breakout into the historical all-time high zone, having finally stabilized above $4,350.' According to him, as long as this zone continues to hold as support, historical highs are not far off.
