Ethereum price plummets but technical indicators hint at future surge
Ethereum is currently in the "oversold" zone, suggesting a potential turnaround in the near future.
- ETH's price skyrocketed by 400% the last time it was "oversold" back in Q4 2018.
- ETH's annual losses now stand at -42%.
- Analysts believe that Ethereum could slip as low as AUD$933 (US$650) before forging a trend reversal.
Ethereum has been closely following the price of Bitcoin. The digital asset lost 7% of its value over the last 24 hours, dropping from AUD$2,200 to $1,875. ETH is currently trading at AUD$1,936 while exhibiting weekly losses of 25%.
The altcoin has lost 20% over the past week, with most of these losses coming after the United States Labor Department revealed that inflation figures had scaled up to 8.6% last month, their highest levels since December 1981. As a consequence, Ethereum has once again entered the "oversold" zone for the first time in over 36 months, as per its weekly relative strength index (RSI).
Experts deem an asset to be oversold when its RSI reading dips below 30. The metric also suggests that investors have a good opportunity to accumulate the asset, potentially even leading to a trend reversal in the near-to-mid term. The last time Ethereum was oversold (back in November 2018), it was followed by a major price rally, with the altcoin surging by 400%.
This perceived bullish outlook comes amid a host of bearish macro factors, including rising inflation numbers and a technical indicator showcasing a near-term downward bias. Also, the current high Consumer Price Index (CPI) reading may lead to the Federal Reserve aggressively slashing its US$9 trillion balance sheet, further dampening investor appetite for risk-based assets such as Ethereum, tech stocks and others.
Rocky road ahead
Many analysts are of the view that ETH's ongoing decline could continue in the near term, forcing the currency to eventually bottom out at AUD$933 (US$650). On-chain data provider Glassnode's pseudonymous research lead Checkmate also shares a similar point of view. He believes that weakening decentralised finance (DeFi) fundamentals could result in Ethereum's price correcting even further this year.
Over the last 24 hours, Ethereum has slipped to AUD$235 billion (US$164 billion). The market cap of the digital asset industry as a whole also dropped by 5%.
Disclosure: The author owns a range of cryptocurrencies at the time of writing.
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