Ether (ETH) and Bitcoin (BTC) pulled back on Wednesday every bit investors awaited fresh guidance from the United states Federal Reserve.

ETH's price slipped by 0.57% to $2,857, while the BTC/USD prices were upward 0.68%, irresolute hands at $39,739 at around ten:30 am EST. Notwithstanding, both pairs reached their electric current levels following a downside correction from their respective intraday highs of $ii,391 and $twoscore,925, respectively.

Ethereum and Bitcoin trends in recent history. Source: TradingView

Traders raised their exposure in the cryptocurrency market after Tesla'due south Elon Musk, Ark Invest'due south Cathie Wood and Twitter'due south Jack Dorsey spoke in favor of Bitcoin during "The ₿ Word" conference last calendar week. More tailwinds came amongst speculations about Amazon's plans to accept BTC every bit a payment, a rumor that the retail giant later denied.

Ether, whose 30-mean solar day correlation with Bitcoin stands at 88%, moved in tandem with Bitcoin. Their synchronized price trends connected into the New York trading session Wed, just as markets waited for the U.Southward. Federal Reserve to reveal its tapering plans.

Speaking of tapering...

U.Due south. central bank officials will conclude their two-day policy coming together on Wed, with a argument scheduled to come out at two:00 pm EST. Investors' focus will be on signals from Chairman Jerome Powell near how and when the Fed would outset unwinding its nugget purchase program and any potential shift in its view on inflation.

In detail, the U.Due south. Consumer Toll Index has boomed, hitting v.4% on a year-over-year basis. As a result, as many as 54% of Americans think that the U.S. economy is in poor shape, according to a poll conducted by The Associated Press-NORC Middle for Public Affairs Research.

But the Fed has rubbished the higher consumer prices by calling them "transitory" in nature. As a issue, Powell said in his congressional testimony earlier this month that the central bank would go on its $120-billion-a-month bond-purchasing program, raising concerns that it could crusade farther inflationary spikes, peculiarly in the housing sector.

Brian O'Reilly, head of market place strategy for Mediolanum International Funds, noted that there are no signs of aggrandizement cooling down in the sessions ahead, so the Fed might just first looking into the rise consumer prices, if non putting a interruption on its bond-buying program. He added:

"There volition be no change, just they are at the stage where they are starting to talk near talking almost tapering."

What happens to Bitcoin and Ether next?

The Ether and Bitcoin markets' biggest vulnerability is that their valuations may not exist sustained without expanding liquidity from the Fed.

Related: Bitcoin bull outlines 7 steps to more financial stimulus and college BTC prices

Meanwhile, the strong underpinning is that there is substantial capital letter sitting on the sidelines waiting to enter the market, with a DataTrek Research study noting that retail investors on Robinhood lonely concord $400 billion to enter markets on the next big dip. Fred's Retail Coin Fund also notes that retail investors concord over $1 trillion versus $643 billion in 2022.

Retail Fund Money readings show investors in hold of more $1 trillion. Source: Fred

"We live in an unprecedented time of financial and budgetary stimulus," noted Anthony Pompliano, a prominent crypto advocate and a partner at Pomp Investments, in one of his recent notes to clients. He added that investors would exercise so much better while putting coin in fiscal instruments than holding cash or negative-yielding assets. He said:

"If our government and economic organizations continue to outlaw bear markets and ban market corrections through their intervention deportment, and so the market volition simply exist allowed to go higher and higher over time."

Tim Frost, CEO of DeFi wealth management platform Yield App, weighed concerns over analysts' renewed upside outlook for Ether and Bitcoin.

He told Cointelegraph that the markets could resume their downtrend following "a brief rally," wherein Bitcoin falls to as low equally $20,000, taking Ether lower alongside. He added:

"An altcoin revival is a very long way off. The Crypto Fear & Greed Alphabetize is also all the same very much skewed towards fear — indeed, for the longest period, information technology has e'er been skewed in that management. This isn't the beginning of a new bull run as much as the bear being caught off guard taking a nap."

The views and opinions expressed here are solely those of the author and practise non necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you lot should conduct your ain research when making a conclusion.