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Ethereum (ETH/USD) price erased most of the gains it made on Sunday as the cryptocurrency sell-off gained steam. The coin is trading at $3,984, which is almost 5% below the highest level on Sunday. This drop brings its total market capitalization to more than $474 billion.

Ethereum price surged to an all-time high of more than $4,800 in November. Since then, the coin’s price has dropped by almost 20% and lost more than $30 billion in value. It is not alone since other coins like Bitcoin, Solana, and Ripple have all declined sharply. In total, cryptocurrencies have lost more than $800 billion in value in the past few weeks.

There is one main reason for this weakness. First, the Federal Reserve is considering winding down its pandemic response tools at a relatively faster pace than expected. In the past meeting, the bank decided to start slowing the pace of these purchases. 

Now, with inflation rising and the labour market tightening, analysts believe that the bank will increase the pace of winding down the purchases. In theory, risky assets like Ethereum and Bitcoin tend to underperform when the Fed has turned hawkish. 

Another possible reason for the Ethereum price sell-off is profit-taking as we approach the end of the year. Already, Ethereum has surged by more than 400% since the year started. As such, many holders have started to exit their trades.

There are technical reasons as well. In most cases when an asset makes strong gains, it usually moves into a distribution phase as the smart money exits.

Still, there are reasons to believe that Ethereum price will do well in the future. Unlike many blockchain platforms, it is widely used to build decentralized apps (DAPPs). For example, DeFi platfoms built using Ethereum have a total value locked of $180 billion. This figure is higher than those of other platforms combined.

The daily chart shows that the ETH price has moved sideways in the past few weeks. The coin has moved slightly below the 25-day and 50-day moving averages. It is also slightly below the key support level at $4,368, which was the highest level on May 12th. The MACD has also moved slightly below the neutral line.

Therefore, while Ethereum price is under pressure, a bullish rebound cannot be ruled out by the end of the year.

The post Ethereum price prediction as it slips below $4,000 again appeared first on Invezz.

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