Ethereum has been in a death spiral for quite some time. Its market position has frightened investors. Furthermore, it has generated a major sell-off of the second-largest cryptocurrency. But why is ethereum crashing? Could this be the next Terra LUNA? What factors have contributed to its fall?
Ethereum takes a beating for the fifth week in a row
Bitcoin, ethereum, and other major cryptocurrencies have tumbled this weekend, with more than $100 billion erased from the combined cryptocurrency market. According to CoinMarketCap data, the current Ethereum price is 1,280.14 USD as of press time, with a trading volume of 31,073,313,892 USD.
In the last 24 hours, Ethereum’s price has dropped 12.71 percent. The current CoinMarketCap ranking is #2, with a live market capitalization of 155,094,462,626 USD. It has a circulating supply of 121,154,293 ETH coins.
Over the weekend, cryptocurrencies took a beating, with Ether dropping to its lowest level in more than 14 months. The second-largest cryptocurrency by market capitalization is presently trading at around $1,280, down roughly 15%. Ether spent much of the previous month between $1,800 and $2,400. The price drop emphasized investors’ risk aversion – the more dangerous the asset, the more concerned investors are.
Cryptos’ drops were mirrored by equity markets, which fell more than 5% on Friday after the most recent CPI, which some experts thought would tick a touch higher for customers, hit 8.6 percent annually, a 40-year high that signaled rising prices would be around for a long time. Additionally, the Nasdaq dropped 3.5%, and Dow Jones Industrial Average fell over 2.5 percent.
On Monday, Coingecko revealed that ETH had lost roughly $200 in the previous 24 hours and around $500 in the prior week. The price of Ether remained around $1,800 for most of the last 30 days. Ethereum’s market capitalization fell by almost $38 billion in the final three days of the second part of the week.
According to independent analyst Vince Prince, the latest ETH drop could extend to $650. The centerpiece of his downside target is a huge head and shoulders, which is a classic bearish reversal pattern with an 85 percent success rate in meeting its profit objective, as assessed by Samurai Trading Academy.
Meanwhile, the lead on-chain investigator for Glassnode, known by the moniker Checkmate, warned of a possible decentralized finance (DeFi) calamity that may drive Ether’s price even lower in 2022. On June 11, the ratio between Ethereum’s and the top three stablecoins’ market capitalization increased to 80 percent, according to the analyst.
Reasons Ethereum is crashing
One of the reasons for ethereum’s decline is a report by the US Bureau of Labor Statistics that revealed persistent inflationary pressure in May, which marked the fastest growth rate since December 1981. Investors are apprehensive that inflationary forces will cause the Federal Reserve to take even more aggressive measures.
Over the past month, the cryptocurrency market has been trading in a declining trend, with a current value of $1.17 trillion. After Treasury Secretary Janet Yellen presented a negative crypto outlook, the cryptocurrency market shed more than $100 billion over the weekend.
Furthermore, Ethereum’s native currency, Ether (ETH), dropped below its “oversold” level for the first time since November 2018 on June 12, according to its weekly relative strength index (RSI).
After a security’s RSI reading falls below 30, traditional investors believe an asset has been oversold and that it might be purchased. They also view the decrease as an opportunity to buy the dip, expecting an oversold signal to reverse the trend.
On the week ending November 12, 2018, Ether’s previous oversold reading appeared, which preceded a roughly 400 percent price jump, as seen below. While past achievements are not indicators of future tendencies, the latest RSI drop beneath 30 raises the prospect that Ether will undergo a similar (if not quite as sharp) downward pullback in the future.
Ethereum has also lagged behind bitcoin in 2022, which some experts believe might be due to the network’s shift from proof-of-work to proof-of-stake. The upgrade, known as “the Merge,” will alter how things are ordered on ethereum. This will make it more efficient and long-term viable for broad usage. Experts, on the other hand, are keeping an eye on investors and firms who use Ethereum’s platform to develop their technology.
The current crypto market, according to experts, is displaying increased volatility that comes with war, continuous rising inflation, and shifting US monetary policy. Other factors include the crypto market’s tracking of the stock market, expanding popularity among consumers, and declining price levels in recent months.
Government officials have also expressed an interest in more cryptocurrency regulation and even the establishment of a government-issued digital currency. All of this has created a challenging start to the year for ethereum, which fell below $2,200 in January.
In addition, the Ethereum (ETH) developers have decided to postpone the “difficulty bomb,” a unique code in Ethereum that will make it impossible to create ETH coins, by another two months. The difficulty bomb will be a deterrent against Ether (ETH) mining operations, keeping their physical mining devices running as the network shifts from proof-of-work (PoW) to proof-of-stake (PoS).
Celsius, a crypto lending firm, might be another source because it has a large store of stETH. If Celsius sells its stETH holdings, the staking token may fall even further from its Ethereum price peg, exacerbating existing worries.
Despite the bearish sentiments in the cryptocurrency market, the Ethereum user base has remained stable. Transactions on the network have remained above one million every day since December 2020, except for one day. The frequency of daily transactions is a quick and concise assessment of network traffic.