Ethereum’s Unexpected Plunge: Falling from $3,400 to a low of $2,800

Ethereum’s Unexpected Plunge: Falling from ,400 to a low of ,800

Loading

Despite the anticipation surrounding the potential launch of an Ethereum (ETH) ETF by mid-July, the cryptocurrency market experienced a significant downturn. Ethereum, the second-largest digital asset, was not immune to this market rout. From the 1st of July, ETH saw a dramatic drop of over $500, falling from $3,400 to a low of $2,800. This decline erased all the gains that had been accumulated since the partial approval of the ETF in May.

Ethereum educator Sassal pointed out that there were no overtly bearish factors affecting ETH, aside from potential outflows from Grayscale’s ETH trust, ETHE. He emphasized that the entire run since the ETF approvals in May had been retraced, attributing the main overhang for ETH to possible Grayscale ETHE outflows. Sassal also mentioned that there were fundamental reasons to be optimistic, such as increasing regulatory clarity and potential Federal Reserve rate cuts later in 2024.

Comparative Decline: ETH vs. BTC

Interestingly, Ethereum’s decline was more pronounced than Bitcoin’s (BTC). While Bitcoin dropped about 11% over the same period, Ethereum fell by approximately 14%. This disproportionate decline puzzled many traders, especially given the expected launch of the ETH ETF in just a few weeks. Some market observers suggested that the lack of a strong narrative for ETH contributed to its steeper decline. Another analyst, Evans, noted that the market was in a risk-off mode, and potential outflows from ETHE could dampen expectations for the ETH ETF.

The pullback in ETH hit the golden zone at the 61.8% Fibonacci retracement level, based on the 2024 lows and highs. This level, around $2,800, also served as a daily order block and had been a crucial support level in the first half of 2024. The sustainability of this support could depend heavily on Bitcoin’s next moves.

Market Sentiment and Derivatives

The bearish sentiment was further reinforced by negative outflows in the derivatives market. Since the beginning of July, ETH has seen net outflows totaling $4.5 billion, highlighting the prevailing bearish sentiment and the potential lukewarm reception to the ETF launch. Despite these outflows, some analysts believe that the market sentiment could improve if the Federal Reserve adopts a more dovish stance and implements one or two interest rate cuts.

Conclusion

In conclusion, Ethereum’s recent plunge, despite the anticipated ETF catalyst, underscores the complexities and uncertainties in the cryptocurrency market. The disproportionate decline compared to Bitcoin, coupled with significant outflows from Grayscale’s ETH trust, highlights the challenges ETH faces. However, potential regulatory clarity and Federal Reserve rate cuts could provide some tailwinds for Ethereum in the latter part of 2024. As always, the market’s reaction to these developments will be crucial in determining the future trajectory of ETH.