Earlier today, Ethereum (ETH) slid below the psychologically important $4,000 level for the first time since August 8. The fall in ETH’s price can be attributed to a mix of macroeconomic, structural, and crypto-specific factors.
Ethereum Dips Below $4,000, Analyst Explains Why
According to a CryptoQuant Quicktake post by contributor Arab Chain, ETH’s latest descent below $4,000 can be blamed on a complex mix of factors. First, a strong US dollar, coupled with the Federal Reserve’s (Fed) cautious stance following its September rate cut, dampened risk appetite.
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Furthermore, rising bond yields and the increasing risk of a US government shutdown have spooked investors, discouraging them from investing in risk-on assets, including cryptocurrencies like ETH.
Second, the analyst points to the role of leverage in ETH’s latest dip. On September 22, more than $500 million in ETH longs were wiped out within 24 hours, resulting in the unwinding of high leverage that was building up in Q2 2025. During the sell-off, ETH whales faced close to $45 million in forced sales.
In addition, low weekend trading volume and shallow order books enhanced ETH’s price swings. Notably, institutional investors turned to OTC redemptions, following the Fed meeting to reduce their exposure to ETH.
From a technical perspective, ETH failed to decisively break through the stiff resistance near $4,500 – $4,600. Failure to defend the $4,200 support worsened things for ETH, turning the momentum sharply bearish.
The fifth reason was regulatory headwinds surrounding digital assets, especially the uncertainty around MiCA in the EU and US crypto legislation. ETH exchange-traded fund (ETF) outflows worth $76 million weighed on investor sentiment.
Finally, a surge in validator exit queues and reduced staking inflows weakened natural buy-side support. Other factors, such as seasonal weakness and Bitcoin’s (BTC) rising dominance in the market, contributed to ETH’s sell-off. Arab Chain concluded:
While this correction reflects structural positioning and macro forces rather than a broken thesis, volatility may persist until liquidity returns and regulatory clarity improves.
Will ETH Stage A Recovery?
While the momentum is against ETH currently, some analysts are optimistic about a turnaround in ETH’s fortunes in the coming months. For instance, ETH’s CME futures open interest is inching closer to new highs, setting a new potential target for ETH of $6,800 by the end of 2025.
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Similarly, the surge in ETH contracts throughout the year has some analysts convinced that the digital asset may soon embark on a rally to $5,000. ETH’s illiquid supply could further propel it to new highs.
In his latest analysis, crypto commentator Ted Pillows predicted that the increase in global M2 money supply could pave the way for $20,000 ETH. At press time, ETH trades at $3,959, down 3.6% in the past 24 hours.
Featured image from Unsplash, chart and TradingView.com