Ether Prices Plunge Almost 15% As Geopolitical Tensions Fuel Profit Taking
Ether prices took a tumble recently, declining close to 15% in under 48 hours as the latest developments between Iran and Israel helped create widespread profit taking in risk assets.
The world's second-largest digital currency by total market value fell to roughly $2,450.00 late last night, after rising close to $2,875.00 the day before, according to Coinbase data from TradingView.
This materialized at a time when major stock market indices the S&P 500 index and the Dow Jones Industrial Average were both down at least 1% for the day at the time of this writing, according to Google Finance.
'Nothing has fundamentally changed with Ethereum over the last few days, so we must rely on technicals and trader behavior to explain this pullback,' Tom Bruni, editor-in-chief & VP of community at Stocktwits, stated via email.
'Following a strong run for risk assets, such as equities and cryptocurrencies, over the last ten weeks, we're seeing the early signs of investors and traders taking profits," he continued.
'New risks emerging from the Middle East have created more uncertainty in the market, making market participants less willing to hold risk assets in their portfolios over the weekend and into next week,' stated Bruni.
'We're seeing significant chatter from Stocktwits users who are taking profits or hedging their portfolios after such a strong run,' he said.
'For now, Ethereum is simply trading in tandem with other risk assets. And because it's an altcoin, it sits further down the risk spectrum than Bitcoin, which is why it's fallen more sharply. One can compare this relationship to that of small-caps vs. large-caps in the equity market,' the analyst emphasized.
Patrick Liou, associate director of institutional sales for Gemini, also weighed in, offering a similar take on the situation.
'ETH is seeing a pullback in prices as a result of Israel conducting a wide scale military operation on Iran with 14 days of planned operations, according to senior Israeli military officials,' he wrote through email.
'Iran has vowed to retaliate to the latest strikes, leading to escalating geopolitical tensions across the globe and a broad decline across risk assets,' said Liou.
'The ETH outperformance had coincided with a decline for bitcoin dominance from 65.5% to 62%, but most of that move has now retraced as a result of the events in the Middle East,' he stated.
Julio Moreno, head of research for CryptoQuant, also chimed in, providing hard evidence of the profit taking in ether, providing a visualization of this data in the chart below:
'It seems most of ETH's price decline has come from traders taking profits after the increase towards ~$2.8K (see black triangles in the chart),' he stated via Telegram.
It is worth noting that in the runup to the recent price high, many traders opened long positions, which are illustrated by the blue circles.
When explaining why traders decided to sell their ether, Moreno specified that 'The reason traders took profits was the market turmoil caused by the tensions in the Middle East.'
While ether prices have taken a hit lately, the overall outlook is certainly positive, according to Bruni.
He spoke to this via email, stating that "On a positive note, this pullback is not a dealbreaker for the larger trend at play."
'Traders will want to see the price of Ethereum stay above their May lows, near 2,300, to maintain the positive medium-term momentum that has developed since April,' said Bruni.
'Sentiment on Cryptotwits is still in 'extremely bullish' territory, and message volumes are 'high,' signaling that retail investors and traders are sticking with Ethereum despite this pullback,' he added.
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