Eyeing Significant Psychological Levels, Ethereum Crashes
Ethereum price until now slipped under $2,000 for the first time since March 28 after it opened May 29 trading at $1,989. By the end of the trading day, it closed at $1,987, completing a hefty 4.5% drop from the previous day.
The crash came not only due to Ethereum-specific news but also external factors. Ethereum’s price drop coincided with the geopolitical mid-market of America trying to invade Iran’s economy by destabilizing its military.
There are negative impacts of trying to be the world police, investing in most markets. Again the failure of Forex caused by the insecurity of the Middle East caused the Ethereum price to plummet.
Bitcoin suffered a crash of its own, falling 3.35% overall and 2.82% in the previous 24 hours, now ranging between $73,281 – $71,915. The same patterns were followed by XRP, Solana, Dogecoin, and Cardano. As the price of Ethereum crashed across exchanges, panic selling led to a large uptick in trading volume.
Liquidations Increase Market Pressure
One of the main reasons why Ethereum saw such a steep drop in price was due to the high amount of liquidations of leveraged positions. Those who were using borrowed funds to try and capitalize on the price of Ethereum rising were forced to close their positions.
This huge wave of liquidations caused even more selling pressure, which drove Ethereum and many other cryptocurrencies down even more. The rapid increase in price fluctuation caused many of the short-term traders to lose confidence in the market for the rest of the trading session. At the same time,
Ethereum futures open interest also hit an all-time high of 16.39 million ETH. Normally, high open interest is indicative of high trader activity and an increase in volatility, which seems to be the case as many traders opened leveraged short positions in anticipation of Ethereum declining further.
ETF Outflows Continue Hurting Ethereum
Another contributing factor to the bearish sentiment in the market for Ethereum is the Ethereum exchange-traded funds. Ether ETFs saw net outflows for 11 trading days in a row, which caused a loss of $500 million in that span.
Due to the continued outflows, those institutional investors are cutting their positions in Ethereum during this recent corrective phase. The lack of institutional interest has caused a significant reduction to Ethereum’s price.
Because these ETFs continue to experience large amounts of withdrawals, those in the market are extra cautious due to the possibility of even more significant losses.
How Low Can ETH Price Go?
From a technical standpoint, Ethereum breaking the support of $2,000 is a bearish indicator to the market, with the next support to watch being $1,950.
Should selling pressure and ETF outflows remain high, ETH could fall close to $1,900.
The Relative Strength Index (RSI) is currently 31.98, showing Ethereum is almost in the oversold range. Buyers may lean towards dip buys; however, the focus is more on Bitcoin’s movements than on Ethereum’s.
If BTC recovers and maintains the support level at $74,332 and $72,650, respectively, ETH could also make a quick recovery. Until then, the downward trend continues to affect Ethereum.
As for Ethereum trends, a price jump to $2,100 and a recovery above the 7-day simple moving average would be a necessary requirement. Until then, momentum continues to lean on the bearish trends.
Conclusion
Ethereum’s recent drop below $2,000 shows pressure is increasing. This comes after growing geopolitical pressure, ETF outflow, and a large number of leveraged liquidations. Many are noticing that Ethereum, along with other major cryptocurrencies, has become more and more responsive to market macros. This has increased the downward pressure placed on Ethereum due to Bitcoin’s weakness.
There is still caution in the market despite ETH nearing an oversold status. The more likely scenario sees ETH move below $1,950 and approach $1,900. A more bullish scenario sees Bitcoin making a recovery with the liquidity of institutions increasing, causing ETH to move back up and above $2,100.
Day to day, oscillators (indicators of market internal momentum) are showing strong bullish pressure, but a lot more is needed to resume a more bullish long-term trend. ETF inflows, along with Bitcoin price action and other global macros, have a major say on Ethereum’s pricing.
