I've been watching Ethereum closely for years. We know that everyone’s popping the Champagne over ETF approval. Others are labeling it the golden ticket that will shoot ETH to the moon! While I think that’s great, take a beat before you get dazzled by the press releases. Three major macroeconomic perils are on the horizon. They might be able to utterly run over the Ethereum express and drive its price down into the ground, ETF or not.

Rising Rates, Risk-Off Reality?

Let's talk about interest rates. As you likely know, the Federal Reserve and other central banks around the world have been engaged in a historic rate-hiking spree to bring inflation under control. You may be asking, “What’s that got to do with my ETH? Everything.

The higher interest rates have made traditional, safer investments like bonds more appealing. All of the sudden, that 4-5% yield on a government bond starts to look pretty enticing. It’s a huge contrast to the dramatic ups and downs of the crypto market. This triggers a "risk-off" sentiment. Investors, especially large, institutional investors, are starting to move their money out of more volatile assets such as Ethereum. Now they as investors, they’re parking their money in safer safe havens.

Look back at 2022. With the Fed aggressively raising rates, the price of Ethereum plummeted. It's not a coincidence. While history may not repeat itself, it certainly likes to rhyme.

  • 2022: Fed Funds Rate increased from 0.25% to 4.50%
  • Ethereum Price: Dropped from approximately $3,800 to $1,200

This isn’t even a debate about the numbers, but rather the psychology. Fear is a powerful motivator. If investors are truly afraid of a coming recession, they’re going to focus on capital preservation rather than speculative upside. And Ethereum, for all of its promise, is still viewed as a speculative asset by most.

Regulation's Crushing Hand on Crypto

Currently, world governments are in disarray as they attempt to regulate the unregulated market of cryptocurrency. At first glance, this could be interpreted as a positive development – providing legitimacy and regulatory protection to investors. However, regulation, particularly when overly burdensome, can hinder innovation and push capital in the opposite direction.

Now imagine the EU or Japan requiring the same rigorous KYC and AML standards. This would be downright prohibitive for the average person seeking to purchase Ethereum. Or perhaps they just ban certain DeFi protocols developed on top of Ethereum. This would tank Ethereum’s price, making it inaccessible and unaffordable, crippling its adoption.

Think of it like this: regulation is like putting a leash on a high-energy dog. Sure, that may stop it from zooming headfirst into oncoming traffic, but it hinders it from being able to reach its full potential.

The promise of Ethereum has always been global, permissionless finance. Over-regulation threatens that promise.

Global Recession: The Ultimate Sell-Off

The biggest unknown of all, the elephant in the room, is the risk of a global recession. Over the past few years, we’ve experienced inflation soar, supply chain disruptions become a recurring headline, and geopolitical crises flare up. These are all warning signs.

Now, imagine a full-blown recession hits. Suddenly, millions are out of work, businesses go under, and the stock market craters. What do you think happens to Ethereum?

People aren't going to be worried about DeFi or NFTs when they're struggling to pay their rent. And they’re going to have to burn their own assets, even if those assets are crypto, to survive. This would initiate a huge sell-pressure that could send Ethereum’s price crashing down to depths we haven’t seen in years.

This isn’t purely an economic phenomenon — it’s a reality driven by human behavior. When people are scared, they act irrationally. They panic. And in a panic, everything gets sold.

I'm not saying Ethereum is doomed. Whether it’s the tech, crypto infrastructure development, or the ETF approval, we think this is all a very good sign. But don’t get so distracted by the hype that you forget some very real macroeconomic threats just might be able to derail the Ethereum train. Be skeptical, be alert, and don’t place your bets on the wrong horse.