The cryptocurrency market is currently experiencing ‘extreme’ volatility, with Ethereum [ETH] exemplifying this trend. Following a 37% decline triggered by Trump’s support for tariffs, Ethereum saw a significant surge in value after Eric Trump expressed his support for ETH. These dramatic fluctuations occurred within a span of just four days.
High Risks Involved
While Ethereum has seen a modest 15% increase from its opening price on election day, it remains 30% below its peak of $4,016 reached during the Trump-induced rally.
Over the past week, ETH breached its support level, dropping below $2,800, a three-fold decrease compared to Bitcoin’s decline. Despite the Relative Strength Index (RSI) entering oversold territory and the On-Balance Volume (OBV) showing signs of improvement, the sharp downturn resulted in a loss of over 14% of its previous gains, leading to 6.18 million addresses being in the negative zone.
The primary reason behind this downturn was Trump’s stringent economic policies, which led to the largest 24-hour crypto liquidation ever, amounting to a $10 billion loss. The ETH/BTC pair also hit a four-year low, experiencing daily declines exceeding 3%. With limited capital flowing from Bitcoin to Ethereum, the future pricing dynamics of Ethereum are becoming increasingly uncertain.
Meanwhile, mid-sized cryptocurrencies have dominated the list of weekly gainers, with DEXE leading the pack with a 44% surge. Investors are progressively moving away from large-cap assets, either exiting the market cycle or reallocating their funds to smaller tokens.
So, the question arises: Is Ethereum’s recent decline a temporary setback, or will the growing lack of confidence impede its ability to break through the $4,000 resistance level?
Unfolding Path Ahead for Ethereum
ETH Exchange-Traded Funds (ETFs) have demonstrated a strong performance, with a four-day streak and recording a remarkable $307.8 million in inflows in a single day—the highest figure this year. Notably, Blackrock’s ETHA ETF alone attracted a substantial $276.2 million.
This institutional buying activity plays a crucial role in preventing ETH from slipping below the $2,745 mark. If Ethereum were to hit this level, approximately 4.26 million ETH would face losses, potentially triggering an $11 billion sell-off—a development that warrants close monitoring in the days ahead.
With no clear signs of a robust market recovery in sight, lingering inflation concerns, and a cooling investor sentiment towards Ethereum amidst the prevailing market volatility, any faltering in ETF inflows could lead to a further 15% drop from last year’s election day rally.
Regarding the possibility of surpassing $4,000, significant shifts are required in the aforementioned conditions. Until such changes materialize, brace yourself as Ethereum faces higher stakes than ever before.