Why is the price of Ethereum falling?

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On May 27, the Ethereum rate continued to fall, updating the price low for the second time in the last two days. On May 26, the value of the cryptocurrency fell by 10%, dropping below $1.8 thousand, on the morning of May 27, ETH showed a daily drop by another 7%, the cost of the coin fluctuates around $1.7 thousand.

At the same time, the largest altcoin by capitalization has fallen in price much more than Bitcoin. The first cryptocurrency fell in price by 2% on May 26 and by 2.6% on May 27, to $28.9 thousand, at the moment dropping to $28 thousand.

Experts RBC-Crypto explained the reason for the more severe drop in the price of Ethereum and the unusual divergence in the rates of the main cryptocurrencies.

Just before the opening of the American session on May 26, there was a sharp bearish impulse for the main cryptocurrencies, Andrey Podolyan, CEO of the Cryptorg platform, said. He explained that the coins went just below their support points, made a false release, and with the opening of America, rates turned up dramatically.

“However, all this movement fits into the framework of a flat that has been going on for a week. Bitcoin and Ethereum are locked in tight ranges and cannot yet break out of them,” Podolyan explained.

The drop in Ethereum goes along with the general decline in the crypto market amid investors’ expectations of further tightening of the US Federal Reserve’s monetary policy, Roman Nekrasov, co-founder of the ENCRY Foundation, believes. The expert clarified that there are nuances that show the preferences of investors in the crypto market.

“After the decline of bitcoin, it was quickly bought out by the bulls, and with the ether, the buyout was not so intense and a little later. As a result, there was an amazing and rather rare divergence of the directions of movement of the bitcoin and ether exchange rates – bitcoin went up, and ether fell. In my opinion, this suggests that market participants are more willing to believe in the upcoming growth of bitcoin and rather see it as an asset that promises profit than in ether,” Nekrasov shared.

Ethereum is also under pressure from local news about the loss of DeFi market share – Avalanche and Tron are actively luring decentralized protocols to themselves, according to a specialist. He added that against the background of the US Federal Reserve rate hike, a number of investors could completely reduce their stake in DeFi protocols, which, although they are highly profitable, are also associated with high risk.

“Some market participants could consider that in the current conditions the risks exceed the possible benefits for them from high returns, and transfer money to more traditional assets, whose yields began to grow following the increase in the key rate of the US Federal Reserve, such as treasury securities,” Nekrasov concluded. .

Ether has dropped more than 50% since the beginning of the quarter, an Exmo.me spokesperson explained. In his opinion, this is mainly due to the fact that investors reduce their exposure to riskier assets, including bitcoin and ether, in an environment of higher interest rates.

The expert pointed out that due to the difficult macroeconomic situation (the possibility of a new virus), everyone is waiting for additional sales in the stock market. This, in turn, can affect the cryptocurrency market.

“In addition, the pressure on Ethereum is further exacerbated by the collapsing DeFi ecosystem. The TVL of the DeFi ecosystem built on Ethereum has dropped from a whopping $107.50 billion to $55.30 billion. This 48.5% drop indicates that users are panicking and withdrawing their funds from DeFi products, which in turn is impacting Ethereum,” a company spokesperson added.

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Source: Cryptocurrency

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