Ether fell below the psychologically significant level of $4,000 on Thursday, September 25 as substantial selling activity drove the digital currency lower.
The world’s second-largest cryptocurrency by total market value dropped to roughly $3,825 during the day, according to Coinbase data from Tradingview. At this point, the digital asset was trading at its lowest point since early August.
“Ethereum’s slide below $4,000 was driven by a wave of leveraged liquidations after key support broke, with over $300 million in longs wiped out in 24 hours,” Joe DiPasquale, CEO of cryptocurrency hedge fund manager BitBull Capital, stated via email.
Dipasquale emphasized that multiple variables contributed to the sell-off, stating that “Macro jitters, including the risk of a U.S. government shutdown, added to the risk-off tone, while slowing ETF inflows highlighted weaker institutional demand. The combination of forced selling, macro uncertainty, and softer flows created a perfect storm for Ether’s latest decline.”
Julio Moreno, head of research for CryptoQuant, also weighed in, focusing on activity in the crypto derivatives markets.
“Today’s price decline seems to be caused by traders deleveraging in the perpetual futures market,” he stated via Telegram. “Sell orders are outpacing buy orders by the most in almost two months,” added Moreno.
The chart below helps illustrate this activity by showing the Taker Buy Sell Ratio, which CryptoQuant defines as “The ratio of buy volume divided by sell volume of takers in perpetual swap trades.”
The analyst added that “Open interest has declined by $1 billion in the last 24h, as long positions get liquidated.”
The chart below illustrates this activity:
Key Role Of Fed Policy
Greg Magadini, director of derivatives for digital asset data provider Amberdata, also weighed in, focusing on the the impact that Federal Reserve policy announcements have had on the markets.
The Federal Open Market Committee is responsible for setting the target range for the benchmark federal funds rate, which has broad implications for borrowing costs. This target range has generated significant visibility in recent years, as consumers have grappled with inflation that reached its highest level in decades.
Magadini tied concerns surrounding these policy developments to ether’s price movements, stating via email that “The move lower has been in-line with normal market gyrations, but the underlying cause is likely related to the Fed and the future path of interest rates.”
“Going into last week’s FOMC decision all the markets rallied as rate cuts became a foregone certainty. Now that the event has passed and Powell has been clear that inflation is still higher than expected, the market is beginning to unwind its enthusiasm,” he added.
“That has brought down crypto and risk assets, sending ETH lower today,” said Magadini.
Going forward, he emphasized the key role that the upcoming personal consumption expenditures report, a key measure of inflation, could have on the Fed’s future policy moves. The next report is scheduled to come out Friday, September 26.
The data should give markets a better sense of what the FOMC will do next, Magadini claimed.