- Ethereum (^ETHUSD) is down over 43% in the last 30 days as of June 21.
- This is a certified blood bath -- with indiscriminate selling pushing Ethereum down much worse than any of the other major cryptos in the top 10 market cap list.
- That presents a real opportunity for value investors who are waiting to buy from desperate sellers. Be prepared to load up, especially if Ethereum stays below the psychologically important $1,500 price point.
Ethereum (^ETHUSD) is at a crossroads. It has dropped so far, so fast that if it crosses the all-important psychological $1,000 price point barrier, it could tumble much further.
It’s down over 43% in the last 30 days as of June 21 to just above $1,127. Year-to-date (YTD), it’s off over 70%.
The $1,000 price point will be the key for value investors. They will likely start amassing money to load up if the cryptocurrency crosses that line. For one, it will likely tumble much further, as a key capitulation barrier will have fallen.
On the other hand, now that Ethereum has crossed below $1,500, investors should realize it will not stay below $1,000 for very long. The crypto could rebound fairly quickly. The $1,000 price point could become the inflection point for long-term investors.
Reasons Why It Might Crash Further
One reason this is happening is that even today there was one more Defi liquidity pool that began “pausing” withdrawals. A Hong Kong lending platform called Babel acted to suspend redemptions and withdrawals.
This has caused further panic and many of its investors have had no choice but to “liquidate” their other major holdings in cryptocurrencies. Since Ethereum has a much lower price point than Bitcoin (^BTCUSD), I suspect that many of the Defi liquidity holders held more Ethereum than Bitcoin.
Moreover, Ethereum is more liquid than other cryptos, so it provides a deep source of cash for investors that won’t get access to their liquidity pool funds.
And then there is the proximity effect. Many other investors are exiting their Defi pools and selling their Ethereum in anticipation of further liquidations.
For example, most of the recent selloff came after the U.S. CPI number rose unexpectedly to 8.6% for the last 12 months on June 10, a little over a week ago. Markets started cratering after investors realized that the U.S. Federal Reserve would have to raise interest rates higher than previously forecast.
This begs the question if the same scenario could play out over the next several months until inflation numbers abate their rise. That is what worries investors in Ethereum right now. They suspect that the whole liquidity drying up cycle in the cryptocurrency markets could keep playing out over the next several months.
Where This Leaves Investors in Ethereum
One investor now likens the selloff in cryptos to the Panic of 1907. There was no Federal Reserve then. And “JP Morgan was forced to step in with his own funds and then rally all those guys that were solvent to fix the situation.”
The point is that once investors see a major downdraft in the market for Bitcoin and/or Ethereum, they will rally back into cryptos. This has not happened yet, and I suspect it won’t before Ethereum crosses below $1,000.
But astute investors will start accumulating now. They do not need to acquire their whole position in Ethereum for example, as dollar-cost-averaging helps them lower their overall cost.
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