Ethereum price suffered a harsh reversal this week as cryptocurrency prices suffer a major meltdown. ETH is trading at $4,225, which is about 13% below its all-time high. This drop has pushed its total market cap below $500 billion for the first time in weeks.
Fear and greed index retreat
Ethereum and other cryptocurrencies have crashed as investors remain fearful of higher interest rates. This is mostly because economic data from the United States has signalled that the Federal Reserve will continue tightening its monetary policy in the near term.
For example, retail sales jumped sharply in October while inflation has jumped to the highest level in more than a decade. At the same time, the labor market has continued tightening in the past few months.
Therefore, while Bitcoin and Ethereum are good inflation hedges, investors are concerned that the Federal Reserve will embrace a more aggressive policy.
Meanwhile, Ethereum price has retreated because of the existing greed in the market. In the past few weeks, the fear and greed index has hovered above the greed zone. This happened as the price of Bitcoin maintained a bullish rally. Now, however, the fear and greed index has dropped to the neutral level of 52 and there is a likelihood that this trend will continue for a while.
Still, on-chain data shows that activity within Ethereum’s network is relatively strong. For example, the hash rate and difficulty in mining has kept rising. At the same time, the DeFi ecosystem is doing well even as Ethereum faces significant competition from the likes of Avalanche and Solana.
Ethereum has about 294 DeFi apps that have a total value locked of more than $170 billion. Binance comes a distant second with 159 apps with about $19 billion.
Ethereum price prediction
The four-hour chart shows that Ethereum price has dropped substantially in the past few days. This drop happened after the coin surged to an all-time high. Now, the coin has dropped to the 38.2% Fibonacci retracement level. The 25-day and 50-day moving averages have also made a bearish crossover.
Therefore, the ETH price will likely keep falling in the near term as bears target the 50% retracement level at $3760. In the long-term, however, the price will then bounce back to above $5,000.
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