Ethereum price collapsed on Tuesday as part of the overall cryptocurrency sell-off. Ether declined by more than 8% and dropped to a low of $2,400, which was the lowest level since May 31st. Its market value also dropped to more than $287 billion.
There is a close relationship between Bitcoin and other large and small altcoins. In most cases, when Bitcoin price rallies, it is usually accompanied by a rally of other altcoins. Similarly, when BTC falls, the other digital currencies tend to be more volatile because most of them are usually held by retail traders.
Bitcoin price declined today after the Federal Bureau of Investigations (FBI) managed to hack hackers who hacked the Colonial Pipeline. The bureau did this by identifying the address that Colonial used to send the ransom payments. It then requested a court for authority to access the account.
In total, the FBI managed to recover more than 85% of all Bitcoins that were taken. Therefore, BTC dropped because investors grew concerns about its value if the Feds can track such a ransom. Still, it is unclear what would have happened had the hackers used cryptocurrencies like Monero and Dash.
There are other minor factors why Ethereum price dropped. For example, investors are waiting for the latest consumer price index (CPI) data from the United States that will come out on Thursday. These numbers are expected to show that the headline CPI increased by 4.7% in May while core CPI rose by more than 3%. If analysts are accurate, it means that the Fed will likely start its tightening process.
Meanwhile, activity in the DeFi industry has retreated, as evidenced by the total value locked (TVL) in the sector. The TVL has dropped from more than $67 billion yesterday to more than $58 billion, according to data compiled by DeFi Pulse.
Ethereum price prediction
In my June forecast for Ethereum prices, I pointed to the importance of the resistance level at about $2,900. As you can see below, Ether had struggled to move above this level several times before. Today, the coin has moved substantially below this resistance. It has also moved below the 38.2% Fibonacci retracement level and is now attempting to move below the 23.6% retracement level.
Therefore, in my view, things don’t look for Ether and other cryptocurrencies. After failing to find buyers above $2,900, it means that sellers are now in control and we can’t rule out another decline to May’s low of $1,730. For this to happen, sellers will need to move below the important support at $2,170, which was the lowest level on May 30.