Should You Buy the Ethereum Dip?

Ethereum price has come under intense pressure in 2022 as investors focus on multiple factors. It has fallen by more than 56% this year and by 68% from the highest level in 2021. Its market cap has crashed from an all-time high of over $600 billion to about $190 billion. So, is it safe to buy the ETH dip?

Why has Ethereum crashed?

There are several reasons why Ethereum price has dropped sharply this year. First, macro conditions have changed around the world, leading to fears of a steep recession. For example, inflation has surged to a multi-decade high in most countries while a war in Ukraine is ongoing. Historically, risky assets tend to underperform in a period of shifting macro events.

Second, the Federal Reserve and other key central banks like the European Central Bank (ECB) and the Bank of England (BoE) have all shifted their tones and executed severe rate hikes. In the US, the Fed has delivered several rate hikes and pushed the headline rate up by 225 basis points. It has also hinted that it will continue hiking and implementing quantitative tightening (QT) in the coming months.

 

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Third, internally, Ethereum and other smart contract platforms have been under pressure as key industries struggle. For example, Ethereum’s total value locked in DeFi has dropped from over $75 billion to just $32 billion. The total volume of non-fungible tokens (NFT) traded in Ethereum has also dropped. 

There are other reasons why Ethereum price has continued falling. For example, the lack of fiscal stimulus and the collapse of Terra, Celsius, and Voyager Digital had an impact on cryptocurrency prices. So, is it safe to buy Ethereum dip?

Ethereum price prediction

The daily chart shows that ETH price crashed to a low of $885 in June of this year. This was a remarkable crash considering that the coin was flirting with $5,000 a few months ago. Now, the coin has staged a brief recovery and moved to the 50-day and 100-day moving averages.

At the same time, the Awesome Oscillator has moved slightly above the neutral point. The price is slightly below the 23.6% Fibonacci Retracement level. 

Therefore, at this stage, it is too early to recommend buying the dip. Instead, traders should wait until Ethereum moves above the two moving averages and create a bullish trend. Besides, there is a likelihood that the recent rebound is part of a bear market rally.

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