Why Ethereum Dropped 6% — Is the Bottom in?

Ethereum opened on Tuesday at $3,187 and retraced after a slight uptick. It dropped to a low of $2,976 a few minutes ago and remains close to that level.

The 4-hour chart shows the asset has been in decline since the second half of Monday. As a result, the current downtrend is a spill from the previous day’s bearish sentiment.

In hindsight, the previous intraday session was one of the largest declines since December. ETH lost almost 3% over the period, breaking below the $3,200 support level. However, it is seeing an even bigger dip on Tuesday, shedding over 6%.

The apex altcoin is yet to show signs of a strong buyback at the time of writing. Its proximity to its low increases the risk of a further retracement in the coming hours.

Nonetheless, questions about why the asset dropped rage, with several speculations. One leading option is that the US caused the decline. With geopolitical tensions nearing a tipping point, Donald Trump announced his willingness to engage in dialogue but maintained his position on what he wants, sending mixed signals.

Investors may have picked up his statement as bearish, spreading fear. However, another probable and direct cause is the surge in precious metals’ prices. For example, Gold attained a new all-time high a few hours ago.

It opened Tuesday at $4,670 and surged to a high of $4,766. Currently up by over 3%, the 1-day chart shows a wick extending from the candle, indicating a slight correction.

In recent times, when precious metals like Gold and Silver rise, the crypto market plummets. The same may be true of current price action. However, the question about whether the bottom is in remains unanswered.

Is Ethereum Bottom in?

The 4-hour chart suggests that the bottom is in. A recent article highlighted several bullish indicators that suggest ETH is gearing up for an uptrend. One such is the bollinger bands, which show the asset trading close to the lower band.

Another was that the asset is oversold. The relative strength index slipped below 30 a few hours ago, as the downtrend intensified. Investors may be gearing up to buyback as RSI crossed this level.

However, the 1-day chart shows readings that differ from those on the shorter timeframe. The moving average convergence had a negative crossover on Monday. The MACD reading is significant: since August, Ethereum has lost an average of 15% after each such crossover.

Currently down by over 6%, it may be heading for another 9% drop before calling bottom. Nevertheless, this does not completely invalidate the readings from the 4-hour chart. The bollinger band on the 1-day aligns with the readings from the shorter timeframe, as ETH recently rebounded close to the lower band.

Combining all the readings from both timeframes leads to the conclusion that, while Ethereum is bullish in the short term, it is still prone to further decline in the coming days. In a nutshell, the bottom is not yet in.

Previous price action also aligns with this assertion, as the asset is not trading at a level with significant demand concentration. A buyback at the current price may be short-lived. However, failure to stage a price rally at its current level will cause Ethereum to retest $2,900.

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