Ethereum (ETH/USD) price pared back some of the earlier losses on Tuesday morning as fears of contagion eased. The coin rose to $3,000, which was higher than Monday’s low of $2,802. It has a market capitalization of more than $355 billion, making it the second-biggest cryptocurrency in the world.
Buying the dip?
Ethereum and other cryptocurrency prices crashed on Monday as the fear and greed index dropped sharply. The coin fell to $2,802, which was about 30% below its highest point this week.
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There were several reasons for the sharp decline of the coin. First, there are concerns that American regulators were starting to shift their focus on stablecoins. The regulators, including the Federal Reserve and Treasury, are worried that stablecoins like Tether and Binance USD will lead to more volatility in the financial market.
Intensifying their focus on stablecoins could have major impacts on the blockchain industry. Besides, stablecoins are widely used in most cryptocurrency transactions and are currently valued at more than $120 billion.
Second, the Ethereum price decline coincided with the sharp increase in volatility in the financial market. Indeed, the CBOE volatility index jumped by more than 20% on Monday while the fear and greed index tumbled to the lowest level in months.
The sharp increase in volatility was mostly because of the rising contagion risks emanating from the collapse of Evergrande, the second-biggest real estate developer in China. Investors believe that the collapse will have ripple effects around the world.
As a result, the decline of Ether coincided with the sharp meltdown in stocks, with the Dow Jones, Nasdaq 100, and S&P 500 indices falling by more than 2%.
Meanwhile, the performance of Decentralized Finance (DeFi) also contributed to the sell-off of Ethereum. The total value locked of most DeFi platforms declined sharply as investors remained concerned about the industry.
Ethereum price prediction
The daily chart shows that the ETH price has formed a cup and handle pattern. In most cases, this pattern is usually a bullish sign. It is currently in the handle zone. The coin has also moved below the 25-day moving average and is stuck at the 100-day EMA.
At the same time, the Relative Strength Index (RSI) has been in a downward trend. Therefore, the coin will likely rebound as bulls start eying the monthly high at more than $4,000.
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