Ethereum collapses below $2,000… Is this the bottom, or the start of a further plunge?

▲ Ethereum (ETH), cryptocurrency decline/AI generated image ©

Ethereum (ETH) has finally collapsed below the $2,000 mark amidst extreme fear and the shock of spot ETF outflows. The market is simultaneously issuing warnings that “if it fails to reclaim $2,000, additional downward pressure could increase,” while also maintaining analyses that a long-term forecast of up to $40,000 is still alive.

According to the investment news outlet TradingNews on May 28 (local time), ETH fell to the $1,989-$1,992 range during intraday trading, dropping approximately $79.71, or about 3.8%, in a single day. This was influenced by US military actions near the Strait of Hormuz, inflation concerns, and the potential for tightening by the US Federal Reserve (Fed), which put pressure on risk assets across the board. ETH's market capitalization is approximately $233 billion to $240 billion, with a 24-hour trading volume of about $17 billion. The outlet reported that ETH has fallen by about 60% from its all-time high of approximately $4,946.

The recent market sentiment has become even more unfavorable for ETH. US Personal Consumption Expenditures (PCE) price index rose by 3.8% year-on-year, reigniting inflation concerns, and the market is even discussing the possibility of a Fed interest rate hike. Furthermore, the prolonged conflict between the US and Iran has led to rising international oil prices, expanding risk-averse sentiment. The outlet noted that in this environment, investor funds are moving into cash, short-term government bonds, and AI-related stocks, causing ETH to be relatively overlooked.

ETH's relative weakness is also pronounced. Unlike Bitcoin (BTC), which has fallen by about 42% from its all-time high, ETH has plummeted by approximately 60%, intensifying the bearish trend in the ETH/BTC ratio. Specifically, Ethereum spot ETFs have experienced outflows for 10 consecutive trading days recently, with approximately $216 million withdrawn over a week. The outlet analyzed that institutional investors are increasingly preferring BTC over ETH when investing in cryptocurrencies.

Technically, the recovery of the $2,000 mark has been identified as a critical turning point. If ETH breaks above $2,000 again, a short-term rebound to $2,152 and then to $2,462 is possible. Conversely, if it fails to reclaim this price level, further declines and tests of lower support levels are possible. The Fear & Greed Index recorded 25, entering the 'extreme fear' zone, and the 50-day moving average has also turned downwards, reinforcing the short-term bearish trend.

However, optimism persists regarding the long-term outlook. The outlet evaluated that the Ethereum network continues to grow in decentralized finance (DeFi), tokenization, digital identity verification, and enterprise infrastructure sectors, with Layer 2 scaling and the establishment of the Proof-of-Stake (PoS) system also supporting long-term value. Notably, some institutions and analysts are projecting long-term price targets for ETH ranging from $10,000 to as high as $40,000. The outlet predicted that ETH's future direction is highly likely to be significantly influenced by US interest rate policy, Middle East geopolitical risks, and Ethereum spot ETF fund flows.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*