Ethereum is highly correlated with small-cap stocks that are extremely sensitive to interest rates, analysts say, as both may rise with more rate cuts on the horizon.

Analysts from the macro investment firm Milk Road stated on Tuesday that there is an "almost eerie" correlation between Ethereum and the Russell 2000 index, which consists of small-cap stocks.

Both are highly sensitive to interest rates, the analysts noted, and with the potential for four consecutive rate cuts approaching, "both are expected to rise in tandem."

The Russell 2000 index tracks 2,000 smaller U.S. publicly traded companies and is widely used to gauge the performance of the U.S. economy.

The futures market at the Chicago Mercantile Exchange currently predicts a 95.7% chance that the Federal Reserve will cut rates by another 0.25% at its meeting on October 29, with an 82.2% chance of further cuts in December.

Justin d'Anethan, head of partnerships at cryptocurrency private market firm Arctic Digital, told Cointelegraph: "Unlike Bitcoin, Ethereum can generate yield, which is very important in a world where rate cuts are not only priced in but almost certain."

ETH and the Russell 2000 index also appear to show a cup-and-handle pattern, a bullish continuation pattern that signals a breakout after a consolidation period.

Michaël van de Poppe, founder of MN Fund, stated on Wednesday that there are two reasons why ETH is likely to reach new all-time highs soon.

First, the ETH/BTC trading pair "looks like it has bottomed out," and after experiencing a relatively normal correction, it is ready to enter a new upward phase.

Second, gold has seen a "crazy parabolic rise" after breaking the $4,000 per ounce peak, which means it should pull back at some point, "triggering a large-scale risk appetite shift."

d'Anethan added: "If global central banks enter an easing mode, there is a strong case for capital rotation into risk assets with upside potential, and ETH fits that profile."

Chart analyst Matt Hughes commented on Wednesday: "ETH looks ready to break through the all-time high area as it has finally found stability above $4,350."

Hughes set the next upward target for Ethereum at $5,200, while analyst "Poseidon" indicated that the cycle top would be $8,500.

As of the time of writing, Ethereum has pulled back, down 6% on the day to $4,430, nearing the key support area around $4,400.

Related: S&P Global launches a digital market index tracking cryptocurrency and blockchain stocks

Original article: “This Spooky Ethereum Correlation Suggests Breakout Is Imminent”

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