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The cryptocurrency market saw a significant correction today and the price of Ether (ETH) has not escaped the carnage. Over the past 24 hours, the top altcoin has fallen by 12% as the price has fallen to $ 331. Over the same period, the price of Bitcoin (BTC) fell 6.3% to find support near $ 10,300.
Ether’s decline comes after a head and shoulders pattern became clear over the daily time frame and the price slipped into a downtrend over the past four days.
1 week ETH / USD chart. Source: TradingView.com
Three reasons are likely behind Ether’s poor performance: a technical rejection, a slight deflation of the bullish race of decentralized finance (DeFi), and a weakening of momentum.
Several analysts expected Ether to correct
When Ether’s weekly candle opened on Sep 21, some technical analysts suggested the likelihood of a new bearish test.
A pseudonymous trader known as “Cred” said Ether could retest the $ 390 level before seeing a potential pullback. He explained:
“The weekly time frame still looks like a new bearish test of the previous range ($ 390). Bitcoin looks better on the weekly, but it is also pulling out of daily resistance.”
Since then, the price of Ether has dropped from $ 372 to $ 331 in major cryptocurrency exchanges.
Michael van de Poppe, a Cointelegraph employee and full-time trader on the Amsterdam Stock Exchange, raised a similar point. Van de Poppe pointed out that the $ 385 to $ 395 resistance range signaled that strong rejection could be on the cards.
ETH / USD 4-hour chart. Source: TradingView.com
Eventually, the rejection of a key area of multi-year resistance led the selling pressure on Ether to intensify.
Van de Poppe said:
“The $ 385-395 level says; no Bueno. Continuous movements limited to distance. If we hit $ 280 and / or $ 250, I’ll be looking for longs. “
Ether was already facing clear rejection at a key resistance level before Bitcoin began to retreat sharply. It appears that Bitcoin’s rejection of $ 11K simply amplified Ether’s short-term downturn.
The DeFi fix put additional pressure on Ether
Over the past three months the Ethereum network has thrived as user activity has skyrocketed and various on-chain metrics have demonstrated significant demand for Ether.
The explosive growth of the DeFi industry led to overwhelming demand on the Ethereum blockchain network to the point where it started to clog and transaction fees exploded to new highs.
Data from Cryptofees.net shows that Ethereum is processing around $ 3.77 million in daily rates for miners. By comparison, Bitcoin has averaged around $ 369,000 in daily fees over the past few weeks.
Much of the optimistic sentiment around Ethereum revolved around the rapid growth of the DeFi space. So when the DeFi tokens froze, it is likely to have put additional selling pressure on Ether.
On average, DeFi tokens have experienced a 40% drop in the past week. DeFi giants such as Yearn.finance (YFI) have also fallen by 46% over the past ten days.
Market momentum weakening
Even before Bitcoin’s price drop, Ether was significantly lagging behind BTC. The price has continued to stagnate for the past two weeks, as BTC managed to climb from $ 10,300 to $ 11,100.
Since its annual peak, the price of Bitcoin has dropped by around 16%. Conversely, Ether fell more than 30% from $ 488.95 to $ 342.
Despite this, in the long term, on-chain analysts generally remain optimistic about the performance of Ether and the Ethereum network.
Increased number of Ethereum weekly active users. Source: CryptoQuant
Ki-Young Ju, CEO of the CryptoQuant chat data platform, said the number of weekly active users of Ethereum is on the rise. This data underpins the continued increase in demand for DeFi platforms and shows that the fundamentals of the network are strengthening.
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