The cryptocurrency market continues to show high volatility, and today, Ethereum's (ETH) significant price drop has drawn attention. In this article, we will explore the key factors influencing the drop in ETH’s value, including macroeconomic trends, technical indicators, news from the crypto industry, and other important aspects.
Today, Ethereum's price dropped after failing to hold a crucial support level at $3,500. This led to a panic sell-off, which may cause further corrections. Currently, ETH is trading at $3,119, marking a drop of around 15% in the last 24 hours and about 20% over the past four days. This sharp decline highlights the current bearish trend in the cryptocurrency market.
Unfavorable trends for Ether on December 20th reflect similar declines in other segments of the crypto market. The total market capitalization of cryptocurrencies decreased by around 9%, reaching $3.21 trillion. This drop is linked to broader macroeconomic factors, such as rising interest rates, instability in financial markets, and increasing regulatory pressure in various countries.
Ethereum futures traders have adopted a clearly bearish stance. The cumulative premium on futures positions turned negative for the first time since November 6, indicating a decline in optimism among investors. Ether's price drop triggered the largest liquidation of positions since December 9, with over $299 million in positions liquidated, including $270 million in long positions. This massive closure of positions can lead to a rapid and cascading price decline.
Investors are actively reducing their risks, reflected in significant outflows from Ethereum-based exchange-traded funds (ETFs). After 18 consecutive days of positive net flows, data from SoSoValue shows that Ethereum ETFs in the US saw a withdrawal of $60.47 million on December 19. The main source of these outflows was the Grayscale ETHE fund, which experienced a withdrawal of $58.13 million. This indicates heightened caution among investors in the current market conditions.
The drop in Ethereum's price is also associated with profit-taking by early holders and short-term speculators after ETH surpassed the $4,100 mark. The Dormant Coins circulation metric from Santiment shows that short-term holders (STH) are partly responsible for the selling pressure, as indicated by a small increase in the circulation of Dormant Coins aged 90, 180, and 365 days. Most of these holders are selling at a loss, with realized losses over the past 48 hours exceeding $60 million.
One of the notable participants in the market is the Ethereum Foundation, which sold approximately 100 ETH on December 17, according to data from Lookonchain. Since then, the price of Ether has dropped by about 17%, which is seen as a successful sale at the peak. A post on Lookonchain from December 20 on platform X states: "Over the last year, Ethereum Foundation sold 4,466 ETH ($12.6 million) in 32 transactions, 15 of which occurred at the peak."
The Ether sell-off led to the loss of support at the psychological level of $3,500 on December 19, as shown by data from Cointelegraph Markets Pro and TradingView. This decline confirms the formation of a double top pattern on the 4-hour ETH price chart. The loss of the neckline support at $3,500 may lead to further correction to $3,000. This target was determined by measuring the height of the drop from the price peak to the neckline.
The appearance of a bearish cross on the 4-hour timeframe, where the 50-day simple moving average (SMA) crossed below the 100-day SMA, signals an intensifying bearish momentum. However, it’s worth noting that the relative strength index (RSI) has entered the oversold territory, which could indicate a potential short-term price rebound and a temporary easing of pressure on ETH’s price.
Despite the current bearish trends, the Ethereum market remains one of the most popular and technologically advanced in the cryptocurrency world. Long-term investors may see the current correction as an opportunity to buy at a reduced price, considering the fundamental advantages of the Ethereum platform, such as smart contracts, DeFi, and NFTs. However, as with any cryptocurrency investment, it is essential to conduct your own analysis and consider the risks involved.
Today's drop in Ethereum's price is driven by a range of factors, including technical support levels, bearish sentiment among futures traders, outflows from ETFs, profit-taking by holders, and actions by the Ethereum Foundation. Additionally, technical indicators confirm the formation of a bearish pattern, which could lead to further corrections. Nevertheless, the cryptocurrency market remains dynamic, and Ethereum continues to maintain its significance and growth potential in the long-term perspective.
