Here’s what triggered Ethereum’s decline below $1,600.

After two weeks of an incredible rally for the price of Ethereum, the digital asset is running out of steam. The price of ETH is now back below $1,600 after a sharp decline on Tuesday. The culprit seems to be FUD growing throughout the community.

FUD could have been the trigger.

According to Simply putEthereum’s social dominance has grown exponentially in the past few days. While that can sometimes be a good thing, this time it tells a negative story. Ethereum now dominates 21% of cryptocurrency discussion on social media and an on-chain data aggregator says this could be evidence that FUD may be behind the dip. However, this may not be the only reason.

A report from Bitcoinist He previously showed that profit taking in major assets like Bitcoin and Ethereum increased with price increases. Sentiment also highlighted this in its post on January 20, pointing to an increase in the profit-taking ratio.

Dominance of Ethereum

ETH social dominance indicates FUD | Source: Santiment

Another notable event is when the Wormhole attacker starts moving the stolen funds around. On Monday, the attacker transferred more than $155 million in ETH to OpenOcean which they advanced in exchange for stacked ETH tokens such as STETH and wstETH.

Dumping of these coins in the open market meanwhile saw selling pressure on ETH. This contributed to the already declining momentum, resulting in the current price decline.

Can Ethereum Recover From Here?

Despite the recent decline, overall sentiment for Ethereum is still leaning heavily towards the buy side. This is because the cryptocurrency is still trading well above its 50-day and 100-day moving averages. And even with the decline, it continues to trend around its 200-day moving average.

What this suggests is that, at least in the short to medium term, there is still a lot of bullish sentiment around the digital asset. Add in substantial support that has made it around $1,500 in the past two days and Ethereum still presents as a great investment choice.

Ethereum price chart from TradingView.com

ETH price falls below $1,600 | Source: ETHUSD on TradingView.com

Investors are also seeing good returns during this time with 57% return to all holders. Such figures also help push the bullish narrative for the digital asset as more investors look to take advantage of the downturn and move into the green. Overall, as long as ETH maintains its momentum and trading volume continues to increase, it will test the $1,600 resistance once again.

At the time of this writing, ETH is trading at $1,555. Its price is down 5.27% in the last 24 hours but trading volume is up 11.91% to $9.32 billion over the same period.

Following The best Ovie on Twitter For market insights, updates, and the occasional funny tweet… Featured image from Bitcoin, chart from TradingView.com



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