Ethereum Is in the Middle of Blood Bath, But It’s Time to Start Buying

  • Ethereum (ETH-USD) is down over 33% in the last 7 days as of June 17.
  • This is a certified blood bath -- with indiscriminate selling pushing Ethereum down much worse than any of the other major cryptos in the top 10 market cap list.
  • That presents a real opportunity for value investors who are waiting to buy from desperate sellers. Be prepared to load up, especially if Ethereum moves below the psychologically important $1,000 price point.
Ethereum - Ethereum Is in the Middle of Blood Bath, But It’s Time to Start Buying

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Ethereum (ETH-USD) is at a crossroads. It has dropped so far, so fast that if it crosses the all-important psychological $1,000 price point barrier, it could tumble much further.

It’s down over 33% in the last 7 days as of June 17 to just above $1,000. In the last 30 days, it’s off over 78%.

The $1,000 price point will be the key for value investors. They will likely start amassing money to load up if the cryptocurrency crosses that line. For one, it will likely tumble much further, as a key capitulation barrier will have fallen.

On the other hand, now that Ethereum has crossed below $1,000, investors should realize it will not stay there for very long. The crypto could rebound fairly quickly and the $1,000 price point could become the inflection point for long-term investors.

Ticker Currency Current Price
ETH-USD Ethereum $1,123.28

Reasons Why It Might Crash Further

One reason this is happening is that even today there was one more Defi liquidity pool that began “pausing” withdrawals. A Hong Kong lending platform called Babel acted to suspend redemptions and withdrawals.

This has caused further panic and many of its investors have had no choice but to “liquidate” their other major holdings in cryptocurrencies. Since Ethereum has a much lower price point than Bitcoin (BTC-USD), I suspect that many of the Defi liquidity holders held more Ethereum than Bitcoin.

Moreover, Ethereum is more liquid than other cryptos, so it provides a deep source of cash from investors that won’t get access to their liquidity pool funds.

And then there is the proximity effect. Many other investors are exiting their Defi pools and selling their Ethereum in anticipation of further liquidations.

For example, most of the recent selloff came after the U.S. CPI number rose unexpectedly to 8.6% for the last 12 months on June 10, a little over a week ago. Markets started cratering after investors realized that the U.S. Federal Reserve would have to raise interest rates higher than previously forecast.

This begs the question if the same scenario could play out over the next several months until inflation numbers abate their rise. That is what worries investors in Ethereum right now. They suspect that the whole liquidity drying up cycle in the cryptocurrency markets could keep playing out over the next several months.

Where This Leaves Investors in Ethereum

One investor now likens the selloff in cryptos to the Panic of 1907. There was no Federal Reserve then. And “JP Morgan was forced to step in with his own funds and then rally all those guys that were solvent to fix the situation.”

The point is that once investors see a major downdraft in the market for Bitcoin and/or Ethereum, they will rally back into cryptos. This has not happened yet, and I suspect it won’t before Ethereum crosses below $1,000.

But astute investors will start accumulating now. They do not need to acquire their whole position in Ethereum for example, as there is a high likelihood it could drop further.

But just in case it doesn’t it is good to begin acquiring small tranches now. This is how patient value investors operate in the stock and bond markets. Expect to see the same thing happen here in the crypto market, especially with Ethereum, the second-largest cryptocurrency.

On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in securities in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Mark Hake writes about personal finance on mrhake.medium.com, Newsbreak.com and Beehiiv.com.


Article printed from InvestorPlace Media, https://investorplace.com/2022/06/ethereum-is-in-the-middle-of-blood-bath-but-its-time-to-start-buying/.

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