The Ethereum price tumbled by more than 6% on Monday as the global sell-off in cryptocurrencies and equities accelerated. ETH dropped to $3,135, which was the lowest level since September 14. It is also about 22% below the highest level this month.
There are several reasons why Ethereum price is tumbling. First, a closer look at the price action shows that most cryptocurrencies are declining. Indeed, the total market value of all cryptocurrencies tracked by CoinMarketCap declined by more than 5% to about $2 trillion. This is about $300 below where it started the month. Therefore, the weakness of Ethereum is mostly because of the overall weakness in cryptocurrency prices.
Second, Ethereum has tumbled because of the overall sell-off in other assets. Today, global assets like stocks and commodities have all declined. This decline is mostly because of the contagion risks associated with Evergrande, the giant Chinese real estate developer. If the company collapses, there is a high possibility that other assets will drop as well.
Third, investors are waiting for the upcoming Federal Reserve decision. The bank’s FOMC committee will start its meeting on Tuesday and deliver its decision on Wednesday. Analysts expect the bank to sound a bit hawkish considering that the economy has stabilized.
Finally, the performance of DeFi has also been relatively weak. According to DeFi Llama, the total value locked of all DeFi platforms has declined to $119 billion, down by more than 4% in the past 24 hours. A closer look shows that all DeFi platforms like Curve, InstaDApp and Aave have all dropped by more than 4%.
The daily chart shows that the ETH price has been under intense pressure lately. The coin has formed a cup and handle pattern, which is usually a bullish signal. Indeed, the current decline is part of the coin’s handle formation. It has also moved close to the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has been in a bearish trend.
Therefore, while things look bad, there is a possibility that the coin will rebound and move above the key resistance at $4,015.