Ethereum Price Plummeted 17% – The Worst Is Yet To Come

Ethereum Price Plummeted 17% - The Worst Is Yet To Come

Since May 2022 the crypto market continues to go down in terms of volume and prices. The two of the most popular cryptos in the market are underperforming and are struggling at the moment. Because of that, it’s not a surprise that other cryptos, as well, are going down gradually. 

Ethereum, which is the second most traded cryptocurrency in the market, is down by more than 17% and according to the experts, this decreasing level is going to stay with the digital coin. 

Due to a general market shift away from riskier assets, the price of Ethereum and Bitcoin have been particularly volatile in recent weeks. Inflation data missed expectations and interest rates were hiked by the Federal Reserve by 0.75 percent, which sent stock and crypto markets down this week.

Since the switch from proof-of-work to proof-of-stake is expected to occur in 2022, analysts believe Ethereum’s underperformance may be related to the growing expectation for the network’s transition. According to NextAdvisor statistics, Bitcoin has lost around 55% of its value this year, while ether has lost more than 70%.

Ethereum’s price has fluctuated between $2,100 and $4,000 since it reached a high of $4,100 on December 27. According to analysts, Ethereum’s price might rise as high as $12,000 by 2022, despite a poor start of the year. In this article, you’ll learn more about the ETH price decrease and whether or not it is worth investing money in the mentioned digital asset. 

What Are The Main Factors Contributing

So when did all of these have started? At the beginning of May, one of the most popular stable coins, the Terra Luna coin, decreased in value so dramatically that it completely lost its value. Luna and UST have wiped down almost $17 billion in cryptocurrency worth. Those who invested the bulk of their assets in UST have made some allegations of self-harm; although these stories cannot be verified, it is apparent that many individuals lost a significant sum of money as a result of the collapse.

Fortis Digital’s Boroughs points out that the devastation isn’t limited to Terra’s ecology. To recuperate some of the losses, investors who had been exposed to Luna and UST liquidated large portions of their crypto holdings, which dragged the market down with it. 

As a result, the crash of Terra Luna increased the fear among investors. Individuals actively started to sell their assets, which made many cryptos go down in price. Most investors started thinking about whether or not it would be profitable for them to hold their digital coins. However, some switched to another strategy and started using AI tools like Bitcoin Smarter, which allows traders to get the most out of their trading, analyze the market and make money with the help of Artificial Intelligence.

It should also be stated that there’s rising skepticism about crypto platforms promising spectacular returns after Terra’s (LUNA) ecosystem collapse. As a result of “extreme market circumstances,” another loan site has halted withdrawals.

Celsius has promised that, given enough time, it would fulfill its commitments and uphold its withdrawal responsibilities. It’s possible that the platform may fail to deliver on its promises. Competitor Nexo offered to acquire part of Celsius’ assets, citing “what looks to be bankruptcy” in a Twitter conversation. Moreover, the Celsius revelation raises concerns about the whole decentralized financial system.

Moreover, other crypto platforms may collapse if values remain low for an extended length of time. The Federal Deposit Insurance Corporation (FDIC) insures savings accounts in the event of a bank collapse. Crypto investors, on the other hand, have little recourse if a crypto exchange or DeFi platform goes under.

Nowadays, when the cryptos still continue to decrease in value, the Greed and Fear index shows that the investors are afraid to invest their money in cryptos. This is because the market is quite bearish, which means that prices are low and this tendency may continue for several months. There are some analysts that think that the market is going to recover and rebound in a very short period of time.

While looking at the past data analysis, we can find that the crypto market had many ups and downs. For these reasons, the prediction that the market will still go back to its previous state is rational. However, as the market is quite volatile and prices are fluctuating over time, no one can predict for 100% whether or not the market will return to its old state. 

Inflation Running Hot

One of the main factors that affect the price drop of the ETH is the inflation rate. Since the beginning of the Russia-Ukraine war, many countries around the globe have experienced sharp inflation. BLS stated that the Consumer Price Index (CPI) climbed 8.6 percent from April to May, which is its highest 12-month gain since December 1981.

CPI, an indicator that measures price changes in a wide variety of goods and services, had the highest monthly rises in food, housing, and fuel. The energy index rose 3.9% from one month to the next. This means that the USA, one of the leading countries around the world, is in the face of an increasing inflation rate. As a result, the fear among the investors increases.

Even though cryptocurrencies are often used as a hedge against inflation, they can no longer be used for safeguarding, as the crypto market crashes. Ethereum and BTC are no longer trustworthy, considering the way the crypto market develops and goes down. 

Verdict

To conclude, nowadays there are no exact answers to when ETH evious price will be rebounded, however, investors hope that the bearish market won’t last for a long time. In addition to that, when it comes to ETH price drop reasons, there are some of the most important and prominent ones, including inflation rate increases, Terra Luna Crash, and Celsius concerns. Some experts hope that the situation will get more stable in the near future, however, some experts predict that this is the end of the crypto market. 

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