Ethereum price has been in a freefall this week, continuing a trend that started a few weeks ago when it peaked at a record high of $4,945 to the current $4,145, its lowest level since August 20. This article explores why the ETH price has crashed $4,150.
Ethereum price technical analysis
The daily timeframe chart shows that the ETH price has plunged in the past few days, moving from a high of $4,945 in August to $4,150 today.
It has moved below the 50-day Exponential Moving Average (EMA) and is now inside the Ichimoku cloud indicator. Most importantly, the coin has invalidated the bullish pennant pattern, which is characterized by a vertical line and a symmetrical triangle.
Ethereum price has also slipped below the important support level at $4,100, the highest swing in December last year. Also, it has dropped to the top of the trading range of the Murrey Math Lines tool.
The Relative Strength Index (RSI) has plunged below the neutral point at 50, continuing a trend that started when it formed a double-top pattern at $86.
Therefore, technical analysis suggests the same Ethereum price will likely continue falling as sellers target the next key level at $3,750, the major S/R level of the Murrey Math Lines. More downside will be confirmed when it drops below that level.
However, a move above the strong pivot reverse level of the Murrey Math Lines at $4,375 will invalidate the bearish outlook.
ETH price chart | Source: TradingView
Why ETH price is crashing
Ethereum price is falling as demand from American investors wanes. Data shows that spot Ethereum ETFs experienced net outflows of over $140 million on Tuesday, following a $75 million loss the day before. These ETFs have had cumulative inflows of $13.7 billion and now holds about $27.4 billion in assets under management.
BlackRock’s ETHA ETF accounts for most of these assets as it has over $15.9 billion in AUM. It is followed by funds by companies like Grayscale, Fidelity, Bitwise, and VanEck.
The Ethereum price is also crashing due to the ongoing performance of the cryptocurrency market and Bitcoin. Bitcoin price has plunged to $112,000 from the year-to-date high of $124,200, while the market capitalization of all cryptocurrencies plunged to $3.87 trillion. Cryptocurrencies have historically been highly correlated.
Third, Ethereum is plunging after several hawkish statements by Federal Reserve officials. In a statement on Tuesday, Jerome Powell noted another interest rate cut was not assured.
Some Fed officials have warned that more cuts would present risks to the economy. In a statement on Monday, Beth Hammack of the Cleveland Fed warned that inflation was still a concern for the economy. Her statement was mirrored by Austan Goolsbee, who noted that:
“I’m OK with moving to be in a better spot, and I think eventually, at a gradual pace, rates can come down a fair amount if we can get this stagflationary dust out of the air. But with inflation having been over the target for 4½ years in a row and rising, I think we need to be a little careful with getting all really up-front aggressive.”
Raphael Bostic, another top Federal Reserve official, mirrored the same sentiment, arguing that he saw no need for more rate cuts this year. He warned that he was still concerned about inflation, which has continued rising in the past few months, with the headline CPI rising to 2.9% in August and core inflation remaining at 3.3%. He said:
“Not having been at target for over four-and-a-half years, we definitely need to be concerned about it. I think it’s incumbent upon us to continue to stay vigilant in the fight against inflation.”
Ethereum and other crypto prices do well when the Fed is cutting interest as this normally leads to a risk-on sentiment among investors.
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