Ethereum (ETH) plummeted by over 6% on Friday, continuing a downward trajectory that began on March 24 when it reached a peak of $2,105. The cryptocurrency fell to a low of $1,880, the lowest it has been since March 18, effectively erasing the majority of the gains that had been made over the past fortnight.
This fall came on the heels of the US revealing significant inflation data, indicating that interest rates may remain high for an extended period. The core Personal Consumption Expenditure Index climbed from 2.7% in January to 2.8% in February, while the headline PCE ascended to 2.5%, surpassing the Federal Reserve’s target of 2.0%.
These statistics suggest that inflation will remain steadfast for some time, particularly in the wake of Donald Trump’s Liberation Day tariffs. Increased inflation signifies that the Federal Reserve may maintain high-interest rates for a prolonged period. This is a likely reason why other risky assets also fell after the PCE report. The S&P 500 index decreased by 1.50%, the Nasdaq 100 and Dow Jones both tumbled by 2% and 1.2% respectively. Several cryptocurrencies, including Bitcoin (BTC) and Cardano (ADA), also experienced a drop.
As the fear and greed index fell to 25 in anticipation of Trump’s tariffs, the Ethereum price also took a hit. Economists have warned that these tariffs could potentially lead to a recession, wiping out some of the growth that occurred under Joe Biden’s administration.
At the same time, uncertainty surrounding Ethereum has resulted in Wall Street investors being hesitant to commit. Data from SoSoValue indicates that Ethereum ETFs only saw inflows once in March. They managed to accumulate $14.8 million in net assets on March 4, but have been losing assets since then, reducing the total assets to a mere $2.4 billion. Collectively, all Ethereum ETFs hold just $6.86 billion in assets.
Furthermore, Ethereum has been gradually losing its market share in key sectors such as decentralized finance, non-fungible tokens, and decentralized exchanges. It has lost ground to layer-1 chains like Sonic and Berachain, as well as layer-2 networks such as Base and Arbitrum.
The drop in ETH price can also be attributed to technical factors. The weekly chart illustrates that it formed a triple-top pattern at $4,000 and a neckline at $2,130, the lowest it reached in August of the previous year. Ethereum dropped below this neckline earlier in the month, and subsequently retested it. This break-and-retest pattern is a strong indication of a continuation trend. It has also formed a bearish flag pattern, comprised of a vertical line and some consolidation.
Consequently, there is a potential risk that the cryptocurrency could fall to $1,537, its lowest point on October 9. Any rise above the resistance level at $2,131 would counteract the bearish outlook.
