Ethereum price retreated slightly on Monday after it rallied substantially during the weekend. The ETH coin is trading at $3,770, which was slightly below the weekend high of almost $4,000. A closer look at CoinMarketCap also shows that most cryptocurrencies are in the red too.
Buy the rumour, sell the news
Bitcoin and Ethereum prices have been in a spectacular rally in the past few weeks. There have been several catalysts for this price action but the biggest one has been the launch of a Bitcoin Exchange Traded Fund (ETF).
Analysts believe that the launch of Bitcoin ETFs will make them more mainstream. Besides, ETFs are relatively cheaper options to invest in Bitcoin compared to the GrayScale Bitcoin Trust. The latter a relatively high cost than ETFs.
ProShares, a company that provides ETFs and other services, will launch the first Bitcoin ETF. As a result, the price of BTC soared to almost $63,000 during the weekend. Ethereum price also rose because of its close correlation with Bitcoin.
Also, it rose simply because analysts expect that more companies like ProShares and VanEck will apply for an Ethereum-backed ETF.
Therefore, while this is great news for cryptocurrencies, the BTC and ETH prices are dropping because of what is known as buying the rumour and selling the news. This is a situation where hype pushes asset prices higher ahead of a major event. Then, the price tumbles shortly after the event has happened.
This situation has happened several times before. For example, the Ethereum price declined sharply a few months ago when Coinbase went public. Similarly, ETH retreated sharply after the developers made the first steps towards ETH 2.0 upgrade. Most recently, it declined sharply after the so-called London upgrade. Still, I suspect that this weakness will be just temporary.
Ethereum price prediction
The daily chart shows that the ETH price soared to almost $4,000 during the weekend. This was an important price since it was close to the important resistance at $4,040, which was the highest level in September. The price seems like it has formed a double-top pattern whose chin is at $2,642.
Therefore, because the double-top is a bearish pattern and because of the buy the rumour and sell the news situation, there is a likelihood that the price will have a major dip. If this happens, we can see a 20% to about $3,000 soon.
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