Ethereum (ETH) Price Decline: Analyzing the Factors Behind Today's Drop

Ethereum (ETH) has seen a significant decline in price, dropping over 14.30% in the past 24 hours, reaching approximately $2,330 on February 25, its lowest point since the start of the month. This sharp downturn comes amidst a confluence of negative factors, with the most notable being renewed trade tensions driven by U.S. President Donald Trump’s tariff threats. Here's a closer look at the reasons behind Ethereum's price plunge.

1. Donald Trump’s Tariff Threats Fuel Market Volatility

The latest catalyst for Ethereum's sell-off can be traced to President Trump’s renewed tariff threats. On February 24, Trump confirmed that sweeping tariffs on goods from Canada and Mexico would go into effect next week, ending a temporary pause. This follows his February 1 executive order, which imposed 25% tariffs on goods from Mexico and Canada, with an additional 10% duty on Canadian energy exports.

This development has reignited market fears of escalating trade tensions, which initially triggered market declines on February 3, when Trump first threatened tariffs on these countries, as well as China. This time, the impact on global markets has been felt across both stocks and cryptocurrencies like Ethereum, which has seen a significant price drop.

In response to the renewed trade uncertainty, investors have turned risk-averse, leading to a broader market sell-off. Gold has notably surged by 12% this year as investors seek safer assets, further reflecting the shift away from riskier investments like cryptocurrencies.

2. Crypto Market’s Largest Liquidations Since February Rout

Alongside the negative news on trade, the crypto market has experienced its largest liquidation event since the February 3 market rout, contributing to Ethereum’s sharp decline. In the last 24 hours, a staggering $1.34 billion worth of crypto positions have been liquidated, with long positions accounting for the bulk of these liquidations at $1.25 billion.

For Ethereum specifically, $294.12 million worth of positions were liquidated, with a majority of those being long positions. This kind of forced selling exacerbates the downward pressure on ETH’s price, creating a vicious cycle where liquidations further drive the price down.

3. Technical Weakness and Bear Pennant Breakdown

From a technical standpoint, Ethereum’s price has entered the breakdown stage of a prevailing bear pennant pattern, signaling a potential further decline in the coming days and weeks. On February 23, Ethereum broke below the lower trendline of its bear pennant, suggesting that a continuation of the downtrend is likely.

According to technical analysis, a bear pennant breakdown typically targets a price range measured by adding the previous downtrend’s height to the breakdown point. For Ethereum, this suggests a downside target of approximately $1,945, which represents a potential 20% drop from current price levels.

4. Macro-Economic Pressures

In addition to the technical and geopolitical factors, there are broader macroeconomic pressures at play. Despite a rise in gold prices and a flight to safer assets, Federal Reserve officials have stated that there is no immediate urgency to cut interest rates. However, higher interest rates, combined with increased trade uncertainty, are adding pressure on risk assets like Ethereum, which typically responds to such shifts by moving in tandem with broader market sentiment.

Conclusion

Ethereum’s recent price decline is the result of several intersecting factors: the renewed threat of tariffs from President Trump, a major liquidation event in the crypto market, and a weakening technical setup for ETH. With technical indicators signaling further downside potential and broader market uncertainty looming, Ethereum could face additional downward pressure in the days ahead.

Traders and investors will need to keep a close eye on developments in both the trade war and the broader crypto market to gauge where ETH is headed next. As it stands, Ethereum risks a potential 20% drop if the current bearish trends continue.