The strong price drop of Ethereum (ETH) can currently be explained by several factors:
• Technical market signals indicate overbought conditions and short-term profit-taking. The Relative Strength Index (RSI) has repeatedly been at very high levels above 90, which typically signals an upcoming price correction. Traders often respond here with sales to secure profits.
• Recently, there has been a strong wave of liquidations of leveraged ETH positions. Many traders had to close their positions due to margin calls, which further intensified the downward pressure on the price.
• Ethereum had previously failed to sustainably overcome the important resistance level around 4,000 USD multiple times. Each failure to do so in the past has led to pullbacks between 30% and 75%. This historical pattern reinforces investors' hesitance.
• Additionally, there have been institutional sales and capital outflows from some Ethereum-related financial products (like Grayscale Trust ETHE) since the introduction of spot ETH ETFs, which exerted additional pressure on the price.
• At the macroeconomic level, geopolitical uncertainties and generally risk-averse investors are causing capital outflows from riskier assets like cryptocurrencies.
• Moreover, the usage and activity within the Ethereum network have slowed somewhat, which also affects investor confidence.
Overall, the current price plunge is the result of a combination of technical corrections, liquidations, resistance issues, and external economic uncertainties. However, experts often see this as a temporary correction in a larger long-term upward trend for Ethereum