The Ethereum price dropped by more than 4.5% on Tuesday, snapping a ten-day winning streak. The coin declined to $2,500, which was slightly below this week’s high of $2,692. Still, the coin was about 45% above the lowest level in July. Its market capitalization stands at more than $292 billion.
Ethereum was not the only cryptocurrency to drop today. Most digital currencies like Bitcoin, Cardano, and VeChain declined substantially in the past 24 hours. Bitcoin even declined from its weekly high of more than $42,000 to $38,000. In total, the market capitalization of all cryptocurrencies tracked by CoinMarketCap declined by more than 4.26% in the past 24 hours.
So, why did cryptocurrencies decline? In my view, I suspect that the sell-off was part of profit-taking considering that there was no immediate catalyst for the sell-off. Historically, assets tend to decline after having a major rally as some investors take profit. For one, Ethereum price has already surged by more than 45% in the past two weeks. Bitcoin, for its part, has jumped from less than $30,000 to more than $42,000.
Another reason for the sell-off is the infrastructure bill that is being proposed in the US. The bill allocates about $1 trillion to build American road and bridges, boost broadband connectivity, and invest in clean energy. A closer look at the bill shows that it proposes a tax on cryptocurrency transactions. This provision hopes to raise $28 billion by charging most transactions through brokers like Coinbase and Kraken. It will also seek tax disclosures by crypto miners and other participants.
Still, I believe that Ethereum price is set to rally in August. For one, the platform’s developers hope to launch the London hard fork between Wednesday and Thursday. The fork will lower the number of Ether in circulation by introducing burns. It will also lower the number of Ether mined every day by about a third. This is part of the ETH 2.0 migration that is mean to move Ethereum from a proof-of-work to a proof-of-stake mechanism.
Another reason why Ether price will rise is that the DeFi ecosystem has been relatively successful. After its total value locked dipped below $45 billion two months ago, it has risen to more than $73 billion today. This partially validates that the industry is here to stay.
Ethereum price prediction
Last week, I used the daily chart to make the case for Ethereum prices. Now, let us look at the four-hour chart. The chart shows that the coin has been in an overall bullish trend. It seems like it has formed a top at the $2,700 range. Still, the price remains above the 50-day moving average (MA). It is also slightly above the key support level at $2,410. It also seems like it is in the fourth section of the Elliot wave pattern.
Therefore, there is a possibility that the coin will drop to the support at $2,410 and then resume the upward trend. If this happens, the next key level to watch will be the resistance at $3,000, which is 20% above the current level.