The Ethereum price has struggled in the past few trading sessions. After rising to a multi-month high of $,3370 this week, the price has declined to $3,100. This has brought the total market capitalization to more than $364 billion and made it the second-biggest cryptocurrency in the world.
Cryptocurrency sell-off
Ethereum is not the only cryptocurrency to stage a sharp decline today. Indeed, the price of Bitcoin has declined from this week’s high of more than $50,000 to slightly above $46,000. The total market capitalization of all cryptocurrencies tracked by CoinMarketCap has declined from more than $2 trillion to slightly below $2 trillion.
There are several reasons to this weakness. First, Ethereum price is currently rebalancing after it staged a strong bullish rally recently. Indeed, its price has almost doubled in the past few weeks. As such, whenever this happens, it usually leads to a period of profit-taking.
Second, ETH price has retreated as investors react to the performance of Bitcoin. As mentioned, Bitcoin has retreated to by more than $5,000 in the past few days. In most periods, altcoins like Ethereum and Cardano tends to move in the same direction as Bitcoin. Most importantly, Bitcoin has retreated after it reached a key resistance level at $50,000. The coin tends to decline when it moves to that strong resistance level.
Third, the total value locked (TVL) in the Decentralized Finance (DeFi) industry has also retreated. According to DeFi Pulse, this TVL has dropped to about $82 billion. Still, this TVL is at a substantially high level considering that it was slightly above $40 billion a few months ago.
Ethereum price forecast
A quick look at the four-hour chart shows that the Ethereum price has been under intense pressure lately. The coin has formed an ascending channel that is shown in red. It is currently slightly above the upper side of this channel. Also, the price is slightly above the 23.6% Fibonacci retracement level. The Relative Strength Index (RSI) has also formed a bearish divergence pattern.
Therefore, I suspect that the coin will likely resume a bullish trend during the weekend. If this happens, the key level to watch will be at the upper side of the ascending channel at about $3,350. Any move above that level will push the price to more than $3,500. On the flip side, a drop below the key support at $3,000 will invalidate the bullish view.
