Ethereum price soared to an all-time high on Wednesday and then quickly erased some of these losses. Ether is trading at $4,635, which is about 5% below its highest level this week. It dropped by about 8% in the overnight session.
The price of Ethereum and other cryptocurrencies surged on Wednesday after the latest American inflation data. The numbers revealed that the country’s inflation rose to the highest level in more than 30 years. As such, many investors rushed to Ethereum and other coins because of their safe-haven characteristics.
However, these gains were short-lived as the price has now dropped by more than 5%. It is still not clear why the price dropped. A possible reason is that investors started to take profit considering that the currency’s price has jumped sharply recently.
Still, it is worth noting that Ether was not the only coin that dropped. Indeed, the total market cap of all cryptocurrencies tracked by CoinMarkeCap has dropped by about 4% in the past 24 hours.
Another possible reason why Ethereum price dropped was that investors believe that inflation may have peaked. Besides, there are signs that energy prices have started losing momentum in the past few weeks. Also, the American government is taking measures to ease port congestion.
In my view, the main reason why ETH price is falling is that the price is getting closer to $5,000. Bitcoin is also getting closer to $70,000. In the past, as you will see below, Ethereum price tends to retreat whenever it is approaching a key resistance level.
In the chart below, we see that the ETH price declined to a low of $4,472 in the overnight session. This was an important support level since it was along the ascending trendline that is shown in green. The price was along the lower side of the ascending channel.
Now, the red rectangles show that the price found a strong resistance when it first rose to $3,500, $4,000, and $4,500. Therefore, the Ethereum price will likely bounce back in the near term as bulls target the key resistance at $5,000.