Why did Ethereum price drop to $2,200 today?

Ethereum price was the worst hit in Monday’s flash crash. The collapse caused the asset’s price to fall below $2,200 for the first time last week, at which point it continues to trend lower. As the market shows some recovery momentum, questions remain about what may have triggered the crash.

Ethereum price falls due to whale selling

One of the most obvious causes of the flash crash that affected the price of Ethereum was the fact that large holders sold. This month, ETH hit its highest level of last year, which led to many investors taking profits again. Since there is currently no full bullish turnover in the cryptocurrency market, there are expectations that the market could crash and investors are trying to lock in profits before this happens.

Crypto analyst Ali Martinez flagged the selling of these large holders in a post on Sunday on X (formerly Twitter). According to him, these large holders actually started selling when the price first crossed $2,300. This means that selling pressure increased for a while before it was reflected in the price.

Whales holding more than 10,000 ETH were reducing their holdings toward the end of November. By December their reserves had fallen to their lowest in three months, evidence of a massive sell-off by whales.

ETH price at $2,242 | Source: ETHUSD on Tradingview.com

Uncertainty about macro factors

Macroeconomic uncertainty also played a role in the cryptocurrency crash, which pushed the price of Ethereum to $2,200. One example of this is the CPI data release expected to take place on Tuesday. Market volatility is expected as investors eagerly await the results of this announcement.

November inflation data is also due to be released this week, and the Federal Reserve’s decision and statement are expected to be released on Monday. High volatility is always expected as investors move to secure some positions ahead of such events.

Nonetheless, Ethereum is starting to show strength once again. It has since rebounded from a low of $2,170 to above $2,000, with the bulls already providing plenty of support. If the price of Bitcoin continues to rise, Ethereum could recover to the $2,300 level before the end of the day.

At the time of writing, the price of ETH is $2,238, down 4.50% in the last 24 hours.

Featured image from Quora, chart from Tradingview.com