Ether Blows Past $3K, Builds Bullish Momentum After Trump's Election Win and Fed Rate Cut

• ETH jumps to highest since Aug. 2.
• Hopes for regulatory relief under the Trump presidency and Fed rate cuts galvanize demand for ETH.

When a beleaguered asset is met with a burst of good news, it can unleash powerful bullish momentum, often outshining the broader market. Ethereum's native token, Ether (ETH), is experiencing this phenomenon following pro-crypto Donald Trump's victory in the U.S. election and the Fed rate cut earlier this week.

ETH, the world's second-largest cryptocurrency by market value, surged past $3,000 on Saturday, reaching the highest since Aug. 2, according to CoinDesk data. Prices have risen 23.39% this week, the biggest gain since May, outperforming BTC's 11.2% gain by a significant margin. The total crypto market capitalization has increased by 13.5% to $2.5 trillion.

ETH's market-beating surge could be attributed to two factors. First, there is hope that the Trump administration will relax regulatory barriers for the digital assets industry, potentially fostering growth in decentralized finance, a sector dominated by Ethereum.

Another equally important factor is the Fed rate cut cycle, which is restoring ether's appeal as an internet bond, offering a fixed-income return through staking rewards.

On Thursday, the Fed reduced the benchmark borrowing cost by 25 basis points to a range of 4.5%-4.75%, having delivered an outsized 50 bps cut in September. The rate reduction has narrowed the so-called Fed-ether yield differential in favor of ETH.

The way ether options listed on Deribit are currently priced suggests the ETH rally is expected to continue. The call-put skew is positive across time frames, indicating a relative richness of call options offering asymmetric upside potential to the buyer.

Inflows into the spot ether exchange-traded funds (ETFs) have picked up as well. On Friday, BlackRock’s iShares Ethereum Trust ETF (ETHA) registered an inflow of nearly $60 million, the highest in three months, according to Farside Investors.

Note that ETH is still well below its 2021 peak of $4,868, while BTC is trading at record highs above $75,000.