An Ethereum price crash is underway, with the token moving from last week’s high of $4,800 to a low of $4,260, its lowest level since August 12. It has moved into a technical correction after falling by over 11% from its highest point this month. So, why is ETH going down today?
Ethereum price is crashing amid profit-taking
The first main reason why the Ethereum price crash is happening is that investors are taking profits after the recent rally that pushed it closer to a record high. At its highest point last week, Ether was up by 243% from its lowest point this month.
Historically, an asset tends to pull back after staging a strong rally as investors take profits. For example, Bitcoin price has dropped to $117,000 from its all-time high as investors book profits.
Some of this profit-taking is taking place voluntarily, while the others is being forced on through liquidations. Data shows that liquidations jumped by 314% to $503 million in the last 24 hours. $117 million worth of ETH tokens were liquidated.
Technicals explain why the ETH crash is happening
A closer look at Ethereum price chart explains why it is crashing. First, the plunge could be part of a scenario known as a break-and-retest pattern, where an asset crosses a crucial resistance and then retests it. It is one of the most common continuation signs in technical analysis.
In this case, ETH price crossed the important resistance level at $4,113, its highest level in December last year. It is now attempting to retest that support level, which will be a sign of a bullish continuation pattern.
The other technical reason why the Ethereum price is crashing is known as mean reversion. This is a situation where a surging asset crashes so that it can come closer to the moving averages.
In this case, Ethereum has deviated from the moving averages significantly. Its current price of $4,250 is much higher than the 100-day moving average at $3,200 and the 200-day MA at $2,917. As such, it makes sense for the token to crash based on the mean reversion theory.
The other technical reason why ETH price is plunging is that the coin became highly overbought as it surged. The RSI indicator peaked at 86, while the Stochastic Oscillator surged to a high of 99.
Ongoing crypto market pullback
Ethereum price is also plunging because of the ongoing crypto market crash. A closer look shows that Bitcoin price has dropped to $115,000 from last week’s high of $124,200.
Other tokens like XRP, BNB, and Solana have all plunged by over 5% in the last 24 hours, while the market cap of all tokens has crashed to $3.88 trillion.
The crypto industry is often highly correlated, with most altcoins plunging whenever Bitcoin loses momentum.
Will ETH price surge resume?
So, will the Ethereum price surge resume? Odds are that the price of Ethereum will bounce back over time. Besides, data shows that there is robust demand from investors, with ETF inflows surging.
The other main catalyst is that the number of Ethereum treasury companies is rising. These firms, which seek to mimic MicroStrategy, are raising billions to buy ETH. For example, Tom Lee’s BitMine is raising over $20 billion to continue its buying.
The ongoing accumulation is happening at a time when the supply of ETH in exchanges has continued to fall. As such, rising demand and falling supply will always lead to more gains.
Also, Ethereum is the most dominant players in key areas like decentralized finance, stablecoins, and non-fungible tokens.
Read more: The bullish case for the falling Ethereum price
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