Ethereum surged in the crypto markets on Friday, gaining 3.8% to reach $4,013.06, successfully reclaiming the $4,000 threshold. The move outperformed other majors, with Bitcoin rising to $109,423.18 to briefly reclaim the $110,000 threshold, while Dogecoin added 3.4% to $0.2283 and Solana advanced 2.5% to $201.43.
The measured approach followed the release of new U.S. inflation figures that matched expectations. The Fed’s favored gauge, the Personal Consumption Expenditures index, saw a year-over-year increase of 2.7% in August, with core PCE, which excludes food and energy, rising by 2.9%. Fabian Dori, noted that the report reinforced the Fed’s narrative of gradually easing price pressures, while policymakers find themselves caught between persistent inflation and a softer labor market. “For investors, the implications are twofold: if inflation trends lower, risk assets may find support from confidence in the Fed’s easing cycle,” he stated. “However, any unexpected positive developments in upcoming data could delay short-term rate cut expectations, putting pressure on equities and strengthening the U.S. dollar.”
Even with Ethereum’s strong performance, the overall sentiment in the crypto market continues to show signs of fragility. The Fear & Greed Index dropped to 28 on Friday, marking its lowest point since mid-April. This decline indicates heightened fear among traders following Thursday’s staggering $1.1 billion liquidation wave that eradicated leveraged long positions. “In recent days, roughly $3 billion of levered longs have been liquidated,” stated Matt Mena. As excess leverage has been eliminated, market positioning has turned bearish. Major tokens such as ETH, BTC, SOL, and DOGE are now exhibiting a long-to-short ratio of merely one-to-nine. The prevailing extreme bearish sentiment, coupled with levels nearing record lows, “sets the stage for a potential short squeeze,” Mena argued.
Some participants exhibited a more cautious approach. Paul Howard, cautioned that the market may experience a downward drift before finding stability. He highlighted Bitcoin’s decline beneath its 100-day moving average, falling under $110,000, alongside the total crypto market cap dipping below $4 trillion, as indicators of weakness. “The market is experiencing a healthy correction, characterized by a lack of panic or any notable increase in volatility,” he stated. “It is likely that we grind lower the coming weeks,” he stated, expressing doubts about whether crypto will revisit record highs in 2025.