- Ethereum price has been in a strong bearish trend.
- It is attempting to cross the support at $1,000.
- There are multiple catalysts pushing ETH lower.
Ethereum price crash is accelerating as investors start facing margin calls amid a change of tone by the Federal Reserve. The ETH token is trading at $1,069, which is the lowest it has been since 2020. Its market cap has crashed to $131 billion.
Why is ETH crashing?
Ethereum price is crashing because of several key catalysts. First, the Federal Reserve and other central banks have gone remarkably hawkish.
In its decision this week, the Fed decided to hike interest rate by 0.75%, the highest increase in almost three decades. It also signaled that it will continue tightening by either 0.75% or 0.50% in the coming meeting.
A hawkish Federal Reserve is usually bad for stocks and other riskier assets. For one, higher interest rates usually lead to higher bond yields. Therefore, with a two-year bond yielding 3%, many investors believe that it is a better investment than riskier assets.
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This explains why Wall Street has been in a strong bearish trend in the past few weeks. The Dow Jones index declined by 740 points on Thursday while the S&P 500 and Nasdaq 100 declined by more than 2% on Thursday.
Ethereum price is also falling as investors dump key assets in its ecosystem. For example, a look at decentralized finance (DEFi) shows that the total value locked (TVL) has slumped in the past few months. Investors are simply getting afraid of investing in these risky assets after the recent crash of Terra and the ongoing de-pegging of USDD.
The same weakness is happening in other industries like the non-fungible tokens (NFTs) and the metaverse.
Ethereum price is also falling after the ongoing de-pegging of staked Ether, a coin that was developed by Lido. Most importantly, many traders and hedge funds like Three Arrows are now nearing margin calls.
Ethereum price prediction
The daily chart shows that ETH price has been in a strong sell-off in the past few months. This decline accelerated when the price moved below the support at $1,705, which was the lowest level this year. It has now moved to the extremely oversold level, according to various oscillators. It is also below the 25-day and 50-day moving averages.
Therefore, with the Federal Reserve continuing its hawkish tone, there is a likelihood that ETH price will continue slipping. If this happens, the next key support level to watch will be at $500.
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