Ethereum's Ether Slumps Amid Geopolitical Tensions and Crypto Market Decline
Summary:
Ether (ETH), Ethereum's main token, experienced a downturn of 3.45% to $2,990 on 16 April, following a broader slump in the cryptocurrency market. The ongoing geopolitical tension in the Middle East and a probable extension of high U.S. interest rates have further influenced this decline. Additionally, a decrease in Ether holdings among "whales" (big investors) has exacerbated the decline. The slight increase in funding rates fails to counter the impact of the sharp decrease in open interest due to declining market participation.
On April 16, Ether (ETH), Ethereum's venerable token, witnessed a 3.45% reduction in value, slumping to $2,990. This loss corresponds to a steady dwindling trend initiated on March 11, when ETH's value soared to a three-year peak of $4,095. Consequently, the cryptocurrency has recoiled by 27%, echoing similar trends in an overall crypto market.
Per TradingView's daily ETH/USD price chart, the airstrike could be perceived as a characteristic market correction within a bullish milieu, hinting at traders cashing in on Ether's recent TH. However, the sudden plunge in ETH/USD has been intensified by the escalating geopolitical strife in the Middle East and a larger chance of extended high-interest rates in the U.S.
The devaluation of Ether today trails Israel's disclosure of prospective retaliation against Iran, which signifies a growth in Middle East geopolitical conflicts. The market responded by adopting a bearish stance similar to that during the weekend when Iran attacked Israel with drones and missiles. This attack sparked a market backlash, resulting in Bitcoin (BTC) plummeting towards $60,000 and various altcoins plummeting up to 30%.
TradingView’s daily performance chart of ETH/USD vs. BTC/USD and other entities of the TOTAL crypto market, and the S&P500 reveals that the drop in the cryptocurrency market is indicative of a surge in risk-aversion among investors. Fear of risk is now growing due to a persistent U.S. economy which has thwarted the chances of interest rate cuts by the Federal Reserve. For instance, as of April 16, data from CME futures suggested that there’s an 81.5% chance of unchanged rates in June, versus around 50% two weeks ago. Prolonged high-interest rates are viewed as bearish by the crypto trading community.
The cost of expecting more gains from the U.S. dollar has reached its highest since November, signalling a transition towards safer assets. Consequently, this has hampered the buying interest in Ethereum and the broader crypto market today.
Ether's devaluation today is also because of dwindling ETH reserves among the wealthiest investors known as "whales". For instance, a marked decrease has been observed in the number of bodies possessing at least 1 million, 100,000, and 10,000 ETH tokens since March. Conversely, addresses holding 1,000 ETH have slightly increased.
The balance of Ethereum whales as per TradingView shows that larger holders, or whales, can substantially affect market sentiment. Market preferences can turn bearish due to a price drop in Ethereum caused by reduced holdings bearing negative implications for Ethereum's future.
Additionally, the devaluation of Ether aligns with a $58.68 million liquidation of perpetual swap contracts worth $73.41 million altogether. Long position liquidation results in an immediate sale on the market, and excessive simultaneous liquidations can lead to an abundant asset supply in the market, pushing prices down further still.
Moreover, the ETH price drop occurred after a sharp decrease in open interest (OI) from $14.62 billion on April 9 to $11.07 billion on April 16. Subsequently, the funding rate grew slightly to 0.007% for 8 hours, still short of its recent high of 0.094% for the same duration.
Coinglass reports that although the mild raise indicates some bullish sentiment; it might lack the power to offset the sharp drop in OI. It shows Ether traders' willingness to retain long sales, but if market participation keeps declining, it might not bolster a price increase. This review does not offer investment advice or recommendations; every trade or investment involves risk and necessitates independent research.
Published At
4/16/2024 8:35:41 PM
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