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The Ethereum (ETH/USD) price was not left behind in the cryptocurrency sell-off that happened on Tuesday. The coin declined by as much as 20%, undoing most of the recent gains. Its lowest level on Tuesday was the lowest it has been in more than 2 weeks.
Bitcoin sparks crypto meltdown
Ethereum price declined sharply on Tuesday after Bitcoin, the biggest cryptocurrency tumbled. The price of Bitcoin declined by as much as 18% as investors reflected on news from El Salvador.
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The country’s government made Bitcoin a legal tender, making it the first country to do so. At the same time, it bought its first tranche of Bitcoin that was worth more than $20 million. While this was good news for Bitcoin, the news was already priced in.
As such, the price declined as investors sold the news. Ethereum and other cryptocurrencies declined because of the close correlation that exists in the cryptocurrencies industry.
Ethereum price also tumbled because of the performance in the Decentralized Finance (DeFI) industry. Data compiled by DeFiPulse showed that the total value locked (TVL) in the ecosystem declined by more than $9 billion to about $90 billion.
The performance of DeFi is important because Ethereum is the leading platform in the sector. Most platforms like Aave, Curve Finance, and Compound saw a major decline in TVL.
Meanwhile, on-chain data is showing mixed ideas about Ethereum. According to Glassnode, the number of active addresses declined sharply during the sell-off. At the same time, total fees in Ethereum’s network has been on an upward trend. Ethereum’s gas price has also been rising, as shown below. While this is a positive thing, it is significantly below where it was before the recent crash.
Ethereum price forecast
The four-hour chart shows that the ETH price found substantial resistance at the $4,025 level. It then declined sharply on Tuesday. In addition to the Bitcoin reason described above, this decline was mostly because of psychological reasons considering that the coin moved to a key psychological level. This is the same scenario that happened in the past two weeks when Bitcoin rose to $50,000.
The coin has moved below the 25-day moving average while the MACD has been in a bearish trend. Therefore, I suspect that ETH will soon rebound as investors eye the all-time high level at $4,300. Before that, the coin will likely consolidate as a battle between bulls and bears ensues.
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