Why Did Ethereum (ETH) Drop 40% in the Past Week?

In a nutshell –

• A 40 percent drop in seven days has brought Ethereum value down to around $1,000.
• Celsius’s collapse and a wider banking sector crisis have weighed on crypto assets during the past week.

Nearly all of the top 100 digital currency assets fell precipitously in value this week, following a carnage the week before. During that time period, Bitcoin fell by 30% while ETH fell by 40%. In addition, Ethereum’s price nearly fell to $1,000, a shocking drop from its all-time high of $4,700 in November.

What’s the Reason for ETH’s Demise?

Speculative Uncertainty

The crypto fear & greed index, which measures market mood, was at a low of 7 at the time of this article’s publication. That reflects the widespread belief that the value of coins will continue to drop. As premier banks around the world tighten their financial policies in an effort to rein in rising inflation, risky assets are taking a beating. Also, people are reluctant to buy digital tokens because of recession fears and rising living costs.

The DeFi market suffered as a result of the volatile market. With several DeFi apps built on the Ethereum blockchain, decentralized finance is an important part of the entire crypto market. Ethereum’s problems were exacerbated by sharp drops in price.

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Delays in the Ethereum Merge

Since its launch, Ethereum (ETH) has attracted a wide range of applications to its blockchain. Due to rising gasoline and network traffic prices, many people are looking for alternatives. In the absence of a staged update to address these flaws, Ethereum will continue to lose market share.

In the history of the blockchain, the integration of ETH represents a watershed moment in time. But even though it won’t solve congestion and gas issues, this is an important step in the right direction. As a result of the merger, the PoW model will be replaced by a PoS model. While the improvement has been welcomed by many who participated, the delays have prompted some anxiety.

Ethereum’s Stability Concerns

Following the collapse of Terra and Celsius’ decision to restrict withdrawals, the DeFi platform has seen a spike in skepticism. In the meanwhile, the DeFi network Lido has stake Ethereum (stETH). stETH’s loss of the Ethereum peg alarmed investors. That means that one Ether on stETH is worthless. According to Huobi, a drop in stETH might lead to a flurry of liquidations.

Overnight, Ethereum started bringing in recoveries. It was trading for $1,201.61 as of this writing, an increase of 7.94 percent over the previous day. However, stable uptrends have yet to be established for ETH.