Can Ethereum Drop Below $3K? Liquidations Spike as ETH Tanks

Ethereum (ETH) has gone down by more than 10% in the past 24 hours alone and is now retreating for its fourth day in a row, as Powell broke the crypto market.

Not even the end of the U.S. government shutdown has been able to cushion the steep drop that cryptocurrencies have faced in the past few days.

Market analysts have now lowered the odds of a December rate cut from 91% to 47% according to data from FedWatch, indicating that market conditions have deteriorated.

FedWatch Rate Cut Probability (Dec FOMC Meeting) – Source: CME Group

As expected, investors dumped their tokens as they may now have to wait for next year before the Fed reassesses the situation.

Trading volumes for ETH have spiked by 37% in the past 24 hours, now accounting for 14.4% of the token’s circulating market cap.

Investors Withdraw $1.4 Billion from ETFs Since the Last FOMC Meeting

Crypto liquidations have spiked above $1.2 billion in the past 24 hours alone, as the sell-off has accelerated. ETH currently accounts for $230 million of that total, while Bitcoin (BTC) long liquidations have surpassed the latter by 2x at $529 million.

Meanwhile, investors have withdrawn $550 million out of Ethereum exchange-traded funds (ETFs) in the past three days. Net outflows since October 29 have totaled $1.4 billion, showcasing how sentiment has shifted compared to a few weeks ago.

As it is usual on the crypto market, sharp drops tend to accelerate amid a cascade effect. The lower the price goes, the higher the number of positions that get flushed out.

Fear and Greed Index – Source: CoinMarketCap

The Fear and Greed Index currently sits at 22, back where it was 10 days ago. When investors get this pessimistic, it tends to be bullish for cryptos instead of bearish.

For example, the last time that sentiment hit these lows a year ago, Bitcoin spiked from $82,000 to $125,000 in just a few weeks, and altcoins followed.

At this point, Ethereum (ETH) may be nearing a local bottom. The market’s exaggerated response to the latest chain of events (Powell’s hawkish comments plus Trump’s tariff increase) could prompt a strong rebound.

ETH Could Drop to $2,700 as RSI Has Not Hit Oversold Yet

The daily chart shows that a descending price channel has formed as a result of the latest price action.

However, the Relative Strength Index (RSI) has not hit oversold levels just yet, meaning that we could still see the token dropping to lower levels.

ETH/USD Daily Chart (Coinbase) – Source: TradingView

The most likely target for bears would be $2,700. This level acted as resistance during Ethereum’s May-June consolidation, which ultimately led to a breakout to the token’s current all-time high.

The price could recover to $3,300 once it gets there to hit the upper bound of the channel. However, unless it can rise past $3,500, the short-term outlook would still be bearish.

The 200-day exponential moving average (EMA) has now started to act as resistance for the daily price action, favoring a bearish long-term forecast as well.

All in all, unless the Fed reconsiders its stance on the December rate cut, the market could keep tanking over the next few weeks.

Momentum is bullish on the institutional and regulatory fronts amid the approval of new ETFs and a pro-crypto administration at the White House, but liquidity, as always, is still king.