Ethereum (ETH), the native token of the Ethereum blockchain, has experienced a significant price decline today. This article will explore the reasons behind the current drop in Ethereum price, considering both fundamental and technical factors affecting the cryptocurrency market.
Fed’s Hawkish Tone and Market Reaction
On June 15, Ether’s price declined by 1.7% to approximately $1,620, reaching its lowest level in three months. This downturn was driven by the Federal Reserve’s recent hawkish tone, which accelerated the broader weekly downtrend. The U.S. central bank decided to leave benchmark interest rates unchanged due to cooling inflation. However, Chairman Jerome Powell’s announcement of potential rate hikes in 2023, beyond market expectations, contributed to the decline in Ethereum price.
Correlation with Stock Market and Liquidations
In recent years, Ether has exhibited a positive correlation with U.S. stock indexes, often behaving like a riskier asset. On June 14 and 15, Ethereum’s price dropped in tandem with the S&P 500, the Nasdaq Composite, and the Dow Jones. Moreover, the recent decline triggered leveraged long liquidations, reaching a total of $54.95 million on June 15, the highest among the top-ranking cryptocurrencies.
Decreased Demand for DApps and Gas Fees
Ethereum’s price struggles are also influenced by three indicators signaling reduced demand for its decentralized applications (DApps) and high gas fees on the Ethereum network. The United States Securities and Exchange Commission’s (SEC) response in court regarding crypto regulation has created uncertainties and delays, potentially impacting investor sentiment. Additionally, the Ethereum network has faced challenges due to surging gas fees, which have limited DApp usage. Total deposits on the Ethereum network in Ether terms reached their lowest levels since August 2020, indicating decreased activity and demand.
Technical Analysis and Potential Recovery
From a technical perspective, Ether’s price has broken below key support levels, including ascending and horizontal trendlines and the 200-day exponential moving average (EMA). However, there are indications of a potential recovery. The daily relative strength index (RSI) has dropped below 30, entering the oversold region, which often precedes a rebound or consolidation. Furthermore, the ETH/USD pair remains above its 200-week EMA, suggesting a psychological support level near $1,600.
The decline in Ethereum’s price today can be attributed to a combination of factors, including the Federal Reserve’s hawkish tone, market correlations, reduced demand for DApps, and high gas fees on the Ethereum network. Despite the recent drop, technical indicators suggest the potential for a recovery in the near future. However, investors and market participants should closely monitor regulatory developments and network dynamics to gauge the future direction of Ethereum’s price.
This content is provided only for informative reasons and does not represent financial advice. Before making any financial transactions, users should undertake their own investigation. https://cointelegraph.com/news/why-is-ethereum-eth-price-down-today