After what has been two weeks of an incredible Ethereum price rally, the digital asset appears to be losing steam. ETH price has now declined once again below $1,600 after a sharp decline on Tuesday. The culprit for this seems to be the growth of FUD throughout the community.
FUD could have been the trigger
According to holyday, Ethereum’s social dominance grew rapidly in recent days. While this can sometimes be a good thing, this time it tells a negative story. Ethereum now dominates 21% of the cryptocurrency discussion on social media and the on-chain data aggregator says this could be evidence that FUD could be behind the crash. However, this may not be the only reason.
a report of Bitcoinist It had previously shown that taking profits on big assets like Bitcoin and Ethereum had increased with rising price. Santiment also highlights this in his post, noting the rise in the profit-taking ratio on January 20. Taking this in conjunction with the rising FUD presents a recipe for disaster for the digital asset.
ETH social dominance indicates FUD | Source: Santiment
Another notable event was that the Wormhole attacker began moving the stolen funds. On Monday, the attacker moved more than $155 million worth of ETH to OpenOcean, which he proceeded to exchange for staked ETH tokens such as stETH and wstETH.
The dumping of these coins on the open market caused increased selling pressure on ETH during this time. It contributed to the already waning momentum, resulting in the current price drop.
Can Ethereum recover from here?
Despite the recent drop, overall sentiment for Ethereum is still heavily tilted towards buying. This is because the cryptocurrency is still trading well above its 50 and 100 day moving averages. And even with the decline, it continues to trend around its 200-day moving average.
What this shows is that, at least in the short to medium term, there is still a lot of bullish sentiment around the digital asset. Add in the broad support that has built up around $1,500 in the past few days and Ethereum still presents itself as a formidable investment option.
ETH price falls below $1,600 | Source: ETHUSD on TradingView.com
Investors are also seeing good gains during this time with 57% of all holders in profit. Figures like these also help drive a bullish narrative for the digital asset as more investors try to take advantage of the dip and go green. Overall, as long as ETH maintains its momentum and trading volume continues to rise, it will retest the $1,600 resistance once again.
The ETH price is changing hands at $1,555 at the time of writing. Its price is down 5.27% in the last 24 hours, but trading volume is up 11.91% over the same period to $9.32 billion.
