The price of Ethereum’s native token, Ether (ETH), fell below $1,000 on June 18as the ongoing sell-off in the cryptocurrency market continued despite the weekend.
Ether price hit $975, its lowest level since January 2021losing 80% of its value since its all-time high in November 2021. The decline occurred amid the concern about the Federal Reserve raising rates by 75 basis points, a move that sent both cryptocurrencies and stocks into a strong bear market.
“The Federal Reserve has barely started to raise rates and, for the record, hasn’t sold any of its balance sheet either.noted Nick, an analyst at data resource Ecoinometrics, warning that “Surely more casualties are coming“.
Ethereum implosion continues
Investors and traders have been anxiously watching the price of Ether in recent days, fearing that a decisive break below $1,000 will trigger forced liquidations of massively leveraged holdings. In turn, that would put more downward pressure on Ethereum.
The fears appear due to Babel Finance and Celsius Network, a couple of cryptocurrency lending platforms that halted withdrawals citing market volatility.
These fears were further intensified after Three Arrow Capital, a cryptocurrency hedge fund that manages assets worth 10,000 million dollars (amount for May), could not guarantee its guarantee to cover specific participations. This came less than a month after Terra, a $40 billion “algorithmic stablecoin” project, collapsed.
These events have coincided with a massive withdrawal of capital from the Ethereum blockchain ecosystem.. The total locked value (TLV) withdrawal occurred in two parts. First, Ethereum’s TLV in DeFi projects fell by $94 billion following the Terra debacle in May and then by another $30 billion in mid-June.
“The deleveraging event that is underway is observably painful, and resembles some form of financial crisis in miniature.noted CheckMate and CryptoVizArt, a pair of analysts at Glassnode, an on-chain analytics platform, adding:
“However, with this pain comes the opportunity to expel excessive leverage, and allow for a healthier rebuild on the other hand.”
How much can the price of ETH drop?
The aggressive policies of the Fed and the ongoing implosion of the DeFi market suggest extended bearish movements in the Ether market.
From a technical perspective, ETH price must recover $1,000 as its psychological supportwhich, if it breaks down, it could make the token look at $830 as its next target. The same level served as resistance in February 2018, which preceded a 90% decline to near $80 in December 2018.
Meanwhile, as Cointelegraph previously reported, ETH/USD may drop to $420 if Ether’s correction turns out to be anything like its 2018 bear cycle, when the drop reached over 90%.
Curiously, $420 downside target was pivotal as support in April-July 2018 and resistance in August-September 2020.
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