Ethereum risks another 60% drop after breaking below $1K to 18-month lows

As the continuing sell-off in crypto markets continued, Ether (ETH), fell below $1,000 on June 18.

Ether dropped to $975 from its record high of November 2021. This is its lowest level since January 2021. It has lost 80% of its value. Concerns about the Federal Reserve’s rate hike of 75 basis points led to the decline in Ether. This move pushed stocks and cryptocurrencies into a bear market.

“The Federal Reserve has just started raising rates and, for the record,” Nick, an analyst at data resource Ecoinometrics warned that there will be more downturns.

Weekly chart of the ETH/USD exchange rate. Source: TradingView

Ethereum continues to implode

In the last few days traders and investors have been closely watching Ether’s price, in fear that a sudden drop below $1,000 could trigger forced liquidations of heavily leveraged bets. This would increase Ethereum’s downside pressure.

These fears are due to Babel Finance, Celsius Network and a pair crypto lending platforms which halted withdrawals because of market volatility.

These tensions grew further after Three Arrow Capital a crypto hedge-fund managing $10 billion in assets failed to secure its collateral to pay pungent bets. This happened less than a month following the collapse of Terra, an “algorithmic stablecoin project” worth $40 billion.

These events coincided with a large capital withdrawal from Ethereum’s Blockchain ecosystem. Two parts of the total value locked (TLV), unwind were involved. First, Ethereum’s TVL across DeFi project fell by $94B after the Terra disaster in May. Then it dropped by $30B by mid-June.

DeFi total value of Ethereum Source: Glassnode

“The deleveraging event currently underway is observably painful, and is akin a form of mini financial crisis,” noted CheckMate, CryptoVizArt and a pair of analysts from Glassnode.

“But, this pain also offers the chance to flush out excessive leverage and allow for a better rebuild on the other.

How low can ETH prices go?

The Fed’s hawkish policies, and ongoing DeFi market collapse suggest that there will be continued bearish movements in the Ether markets.

Technically, ETH’s value must regain $1,000 to maintain its psychological support. If this is broken, the token could be looking at the $830 target. This level was used as resistance in February 2018. It preceded a 90% drop to $80 in December 2018.

Weekly chart of the ETH/USD exchange rate. Source: TradingView

Cointelegraph reported earlier that ETH/USD could fall as low as $420, if Ether’s correction is anything like the 2018 bear cycle, when it saw a drawdown of over 90%.

Related: 72 out of 100 top-selling coins have dropped 90% or more. Here are the lone stragglers

The $420-downside target was, interestingly, instrumental in support in April-July 2018, and resistance in August–September 2020.

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