Ethereum price continued its strong downward trend on Friday as geopolitical risks rose and demand for cryptocurrencies waned.
Ethereum (ETH) token dropped to $1,937, down sharply from the all-time high of $4,943, and key factors suggest that it has more downside, potentially to the key support level at $1,500.
The weekly timeframe chart shows that the ETH price has remained under pressure in the past few months. It has dropped in the last five consecutive weeks, and is hovering near its lowest level since May last year.
The coin has dropped below the key support level at $2,145, invalidating the inverted head-and-shoulders pattern, a common bullish reversal sign in technical analysis.
Ethereum has dropped below the 50-week and 200-week Weighted Moving Averages. It has also moved below the Supertrend indicator, a sign that bears remain in control.
The Relative Strength Index has moved to the oversold level of 30. Therefore, the most likely scenario is where it continues falling so that the RSI can become extremely oversold, which will then lead to a rebound.
The other main bearish catalyst for Ethereum is that demand from institutional investors has waned in the past few months.
One sign for this is the fact that demand for spot Ethereum ETFs has waned. These funds shed over $130 million in assets on Thursday, bringing the monthly outflow to over $450 million. They have suffered outflows in the last four consecutive months.
Another sign of waning demand is that the futures open interest has continued falling in the past few months and now stands at $23 billion, down from the year-to-date high of $41 billion.
Geopolitics may also contribute to the Ethereum price crash as cryptocurrencies are no longer safe-haven assets.
All indications are that Donald Trump will attack Iran, as the US has accumulated a large armada in the region. In a statement on Thursday, he warned Iran of an attack that may happen in the next 10 to 15 days.
An Iranian attack would have a major impact on financial assets. For example, it would lead to higher crude oil prices, which may lead to higher inflation. This is important as this week’s Federal Reserve minutes showed that some Fed officials are considering rate hikes if inflation remains at an elevated level.
Still, on the positive side, Ethereum has some potential bullish catalysts, including soaring transactions, active addresses, and fees. Also, key metrics in its ecosystem, like the DeFi total value locked has jumped to a record high in ETH terms. Also, its staking queue continues rising, while its market share in the real-world asset tokenization industry is soaring.
