Why is Ethereum (ETH) price down today?

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As a seasoned crypto investor with over five years of experience navigating the volatile crypto market, I’ve seen my fair share of ups and downs – and this latest correction in Ether (ETH) is just another day at the office. The total capitalization falling by 0.8% to $2.29 trillion and the liquidation of over $24 million in ETH leverage positions is nothing new, but it’s always a reminder that the market can be unpredictable.

Over the last day, the value of Ether (ETH) saw a substantial decline, falling approximately 3.5%, leaving it priced at around $2,492.

On October 23rd, Ether’s declining trend followed a similar pattern observed across the broader cryptocurrency market. This resulted in a decrease of around 0.8% in the total market capitalization, which amounted to approximately $2.29 trillion.

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Let’s look at the factors driving Ether’s price down today.

Long liquidations pull ETH price lower

On October 23, Ether’s downward trend was accompanied by significant margin calls or liquidations across the cryptocurrency market. As per CoinGlass data, approximately $24 million in Ethereum leveraged positions were liquidated following the recent events, with around $23.2 million of these being long positions.

In total, the value of all cryptocurrency liquidations added up to approximately $122 million, and this figure was still increasing as of when the article was published.

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In simpler terms, a large sale or bankruptcy (liquidation event) might compel traders to quickly sell their holdings (long positions). If buyers in the market don’t purchase enough of these assets to balance the sale (absorb the sell-off), the price could drop even more due to increased supply.

Ethereum continues to trend lower against Bitcoin

Ether has trailed Bitcoin (BTC) since Jan. 1, and it has continued to underperform the flagship cryptocurrency since the United States Federal Reserve cut interest rates by 50 basis points on Sept. 18. 

Over the same period, Bitcoin has increased by about 11%, while Ether’s growth has been around 6% when considering both in terms of the U.S. dollar.

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Consequently, the value of Ethereum (ETH) has generally decreased compared to Bitcoin (BTC) throughout 2024, indicating a stronger investor interest in Bitcoin.

Approval of U.S. traded Ethereum ETFs led to a rise in the price of Ethereum relative to Bitcoin, with ETH/BTC climbing from approximately 0.04514 on May 16 to 0.05631 on June 1. However, since then, this ratio has been on a steep decline, falling by 31.5% to reach a 42-month low of $0.03856 on October 23. The last time the ETH/BTC ratio was this low was on April 19, 2021.

The relatively poor performance of Ethereum might be due to reduced interest from institutions, as Bitcoin is currently thriving thanks to increased investments in spot Bitcoin Exchange Traded Funds (ETFs), whereas Ethereum-based ETFs are falling short.

Ethereum price faces stiff resistance on the upside

On October 21st, when Ether reached $2,768, it encountered a barrier set by supplier overcrowding near the $2,800 price point, causing its advance to halt.

According to the analysis by a market intelligence firm named CryptoQuant, Ethereum could potentially experience a short squeeze due to increasing leverage and a strong resistance level at around $2,700.

By employing the Estimated Leverage Ratio as a tool for assessing the readiness of futures market participants to assume risk through leveraged positions, an analyst at CryptoQuant named ShayanBTC observed a trend of rising values in this metric over the past couple of months.

This indicates a trend where an increasing number of traders are choosing to open high-leverage short trades on Ethereum, anticipating a continued drop in its price.

“With leverage at concerning levels, the futures market is now considered overheated. This leaves Ethereum vulnerable to a potential short-squeeze event.”

The analyst also said the 100-day simple moving average (SMA) currently at $2,675 “is a key resistance level.”

As an analyst, I’ve found some compelling insights from IntoTheBlock’s IOMAP model concerning Ethereum (ETH). It appears that the range between $2,545 and $2,621 serves as a significant resistance point in ETH’s recovery trajectory. This is where around 2.0 million ETH were previously purchased by approximately 3.2 million addresses. Notably, the 100-day Simple Moving Average (SMA) sits above this area, further emphasizing the importance of this resistance zone.

This means that the path with the least resistance for ETH price is to the downside.

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2024-10-23 20:34