- Ethereum price had a difficult time in January as its price retreated.
- The drop was because of the Federal Reserve and the falling TVL.
- It has formed a rising wedge pattern, hinting of further turbulence.
Ethereum price had a relatively difficult period in January this year as cryptocurrency prices slumped. The ETH token is trading at $2,750, which is significantly lower than its all-time high of almost $5,000. Its total market capitalization has declined to $327 billion, which is significantly lower than its all-time high of almost $500 billion.
Why ETH retreated
There are several reasons why the price of Ethereum declined in January this year. First, the price retreated because of seasonality reasons. Historically, cryptocurrency prices tend to retreat in the first few weeks of the year as investors settle-down.
Third, Ethereum price decline mirrored the performance of other assets like stocks and some select commodities. Indeed, in the United States, the Dow Jones and the Nasdaq 100 indices had the worst January since 2020.
Analysts blame this performance to the Federal Reserve. In its January meeting, the Fed said what most analysts were expecting. In this, it announced that it will leave interest rates unchanged and then implement several rate hikes this year.
The main catalyst was a statement by Jerome Powell in which he failed to rule out aggressive tightening in his bid to fight inflation.
As a result, risky assets declined as American bond yields jumped. The 2-year bond yield rose to the highest level in more than 2 years.
Third, the ETH price declined because of the ongoing concerns about regulations. Many countries are currently drawing regulations for the industry. For example, in Russia, the central bank has asked the government to ban all cryptocurrencies and mining.
Finally, the coin declined as the total value locked (TVL) in its ecosystem declined in January. While the number of DeFi projects in Ethereum has jumped to over 500, the TVL has dropped to about $113 billion. At its peak, it had a TVL of over $150 billion.
Ethereum price prediction
The four-hour chart shows that the ETH price has made some gains in the past few days. It has already risen by almost 30% from its lowest level in February. Along the way, the coin has jumped above the 25-day and 50-day exponential moving averages. It has also moved above the 23.6% Fibonacci retracement level.
However, a closer look shows that it has formed a rising wedge pattern, which is usually a bearish signal. Therefore, there is a likelihood that the coin will decline sharply in February.
If you want to invest in Ethereum, you might be interested in automated cryptocurrency trading robots such as Bitcoin Profit, Bitcoin Revolution and Bitcoin Trader.
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