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Ether prices suffered a notable drop on Tuesday, October 7, falling more than 6% as traders took profits, sending the digital currency lower.
The world’s second-most valuable cryptocurrency by total market value dropped to roughly $4,450.00 after rising to more than $4,750.00, according to Coinbase data from TradingView. The digital asset suffered this decline after climbing more than 20% during a steady, upward trend it experienced starting September 25.
This happened during a day where most of the top 10 cryptocurrencies by total market capitalization were in the red, according to figures provided by CoinMarketCap.
Amid these developments, several market observers offered explanations for why ether suffered a downward movement.
“Today’s pullback in Ethereum and the crypto market is primarily a reflection of profit-taking following roughly 10 days of strong gains across the board,” Tom Bruni, head of markets & retail investor insights at Stocktwits, stated via email.
He commented on how this pattern also materialized in stocks, indicating that “We saw similar weakness in equities where the indexes made new marginal highs, but have struggled to maintain their upward momentum over the past week.”
Tim Enneking, managing partner of Psalion, offered a similar take.
When asked whether profit taking fueled ether’s decline, he replied through emailed commentary “Essentially, that is correct. After the tremendous move up pretty much across the board, all major digital assets retraced a bit today.”
“They now appear to be putting in a short-term bottom and I would expect to see more BTC ATHs shortly,” he added, offering a near-term outlook.
Brian Huang, cofounder of fintech firm Glider, also commented on the matter, focusing on a movement of bitcoin involving a single wallet that was worth billions.
“This afternoon there was a massive 4 billion dollar move from a dormant Bitcoin wallet,” he stated via email.
This post on X (formerly Twitter) mentions the aforementioned movement.
“A move from a dormant wallet is usually a sign of selling and taking profit,” he noted.
“The timing lines up with fresh BTC highs this week as well—a good time to sell,” Huang continued. “The move in BTC had ripple effects across the broader ecosystem which has affected ETH.”
Julio Moreno, head of research for CryptoQuant, offered his input, which focused on activity in the market for ether futures, derivatives contracts that investors can use to either speculative or hedge.
When asked whether ether’s recent drop was caused by profit taking, he replied “correct” via Telegram, adding “And this has more to do with traders taking profit in the futures market.”
He provided the chart below, which helps illustrate this activity:
“As you can see, open interest in the last 24 hours has declined by $1.7 billion as prices fell, indicating profit-taking by traders that held long positions,” he emphasized.
Retail Trader Hesitance
Bruni commented on the mindset of retail investors, describing them as reluctant to purchase at current price levels.
“Amid the retail crowd, there’s some hesitancy in aggressively buying these new highs ahead of earnings season which kicks off next week,” he stated.
“Risks from the Fed, tariffs, or other global tensions have largely been discounted in the market, but earnings remain the wildcard and are seen as the primary risk for stocks and risk assets into the fourth quarter,” Bruni added.
“With that being said, while the major indexes churn sideways, there is still plenty of individual stock volatility that’s attracting traders,” he continued.
Range-Bound Trading Expected
Bruni also offered a near-term outlook for ether.
“As for the crypto market, Ethereum is rangebound between 3,800 and 4,900 for the time being, though retail expects a breakout to new all-time highs eventually,” the analyst stated.
“For now, traders are buying dips toward the bottom of the range and selling peaks toward the top, waiting for the eventual move above 5,000 to signal that the next leg of this altcoin rally has begun,” Bruni added.