Why is Ethereum Dropping? Top Reasons

Like any commodity, cryptocurrencies also have a supply and demand ratio in the market. Following Bitcoin’s big boom and the explosion of interest in cryptocurrencies, investors also searched for the next big thing. Ethereum emerged as one of the fastest-growing cryptocurrencies during the last few years. But as any market watcher will attest, there are no permanent guarantees when it comes to the cryptocurrency market, which remains as turbulent as ever despite being more mature than a few years ago. It is exhilarating, dangerous, and (potentially) rewarding.

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Market Volatility

Ethereum has been hit hard by the dramatic slump in the cryptocurrency market in recent weeks resulting in a loss of almost $1 trillion in two months. The Ethereum price plunged 15 percent within seven days after being among the cryptocurrencies doing very well in February. The volatility in the market mainly caused the huge drop, but the sluggish demand for the Ethereum coins may also be the reason.

The market crash also made the likes of Bitcoin trade below $40k again in 2022, but the recent launch of the Bitgert BRC20 blockchain is one of the significant factors in the spiral of Bitgert price. The plunge affected almost all cryptocurrencies, but some displayed resilience to withstand the market forces and keep booming. Biggert skyrocketed 60 percent in seven days when the entire cryptocurrency industry was experiencing a tsunami.

Number Two Spot

Valued at over $1000 per Ether, Ethereum currently stands in the number two spot in terms of cryptocurrency value giving rise to heightened speculation whether an early investment in this blockchain can yield the same fortunes that Bitcoin traders reaped not many moons ago.

This article shows why the Bitgert BRC20 blockchain has become a formidable competitor to Ethereum. The Biggert chain is gasless, with the transaction fee being virtually zero being a nominal $0.0000000000001. Apart from this common gas fee feature, the Bitgert chain is now faster than Solana, making it the fastest chain in the market. The Biggert chain has also become the most sought-after by investors and blockchain users since it enables 100k transactions per second.

Reducing Interest

With Biggert blockchain offering incredible speed and lower gas fees than Ethereum, the market performance of the crypto will naturally be affected. The attraction of Ethereum is also reducing as more developers join the likes of Bitgert for cheaper gas and faster transactions. Therefore, competition intensity might be why Ethereum plummeted by such a large percentage.

Ethereum’s price has also fallen astronomically since its November highs due to broader economic factors. Having reached an all-time high of $4,891 on November 16, it is now trading at $3,248 – a staggering 33 percent downturn. Let us look at some of the reasons for Ethereum’s recent price drop.

Fed Interest Rates

According to data from the Labor Department, US inflation is at seven percent, which is the highest in 39 years. The Federal Reserve is pulling back on its pandemic economic stimulus measures and is likely to raise interest rates.

Combined with fears about the economic impact of the omicron variant, people are also looking for safer investments. Higher-risk assets like crypto have tumbled with less money to operate.

Falling

Ethereum is not alone in taking a hit. Bitcoin has lost over 30 percent in the past two months, and Cardano (ADA) is down 40 percent. Plus, crypto derivatives trading can magnify market dips. Thousands of traders sold because they didn’t have enough to support their position.

There are price changes because some traders use margin trading to multiply their positions. There is a risk if they do not have enough collateral to support their position, and those forced sales can have a snowball effect, pushing prices further down.

Market Share

Ethereum was the first programmable cryptocurrency to host more applications than any other network and has the most significant amount of money locked into its platform. However, it is losing ground in the market share as it struggles with high fees and heavy traffic. A recent report from JPMorgan suggested that Ethereum’s competitors may overtake it by 2023 despite its planned upgrade to Eth 2.

Therefore, it is clear is that Ethereum, like any virtual currency, will remain volatile for the foreseeable future. However, there is no need to panic just because the price of Ethereum is currently dropping and not expect it to spike again. You should not sell your Ethereum if you believe in the currency and the future viability of the blockchain. It is sometimes difficult to accurately point out the causes for any particular drop in value. The only certainty in crypto markets is its uncertainty which is part and parcel of any high-risk, high-reward opportunity.

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