Why Is Ethereum’s Price Dropping So Fast? The Real Reasons Explained

What’s Behind Ethereum’s Sudden Price Drop?

Ethereum (ETH), the second-largest cryptocurrency by market cap, has seen a sharp decline in value over the past week. Data from CoinMarketCap shows ETH dropped nearly 18% since July 20, 2025, with trading volume spiking by 30%—a classic sign of panic selling. But why? Let’s break it down.

Reason 1: Broader Crypto Market Sell-Off

The crypto market moves like a school of fish—when Bitcoin (BTC) dives, altcoins like ETH often follow. On July 22, BTC fell below $50,000 due to renewed regulatory fears, dragging ETH down with it. As veteran trader Peter Brandt tweeted: “Altcoins bleed harder in BTC downturns. Always have.”

Reason 2: Ethereum Network Congestion and Gas Fees

Last weekend, Ethereum’s average gas fee hit 120 gwei (up from 45 gwei the prior week), according to Etherscan. High fees discourage DeFi and NFT activity, two key drivers of ETH demand. “Users are fed up with paying $50 for a simple swap,” noted BTCC analyst David Lin in a July 24 report.

Reason 3: Macroeconomic Pressure

The U.S. Federal Reserve’s 0.5% rate hike on July 19 spooked risk assets globally. Crypto, often treated as a high-beta tech stock, got hammered. “ETH’s correlation with the NASDAQ is now at 0.87,” TradingView data shows—meaning it’s almost moving in lockstep with tech stocks.

Is This Just a Correction or the Start of a Bear Market?

History offers clues. ethereum has weathered 15 drops of 20%+ since 2020, per CoinGecko, only to rebound higher each time. However, this dip feels different. With staking yields down to 3.8% (from 5.2% in June) and DeFi TVL shrinking by $12B, the fundamentals look shaky.

What Are Traders Doing Now?

Derivatives tell the story. ETH futures open interest surged to $8B this week—mostly short positions, per CryptoQuant. Meanwhile, options traders are betting on $2,200 ETH by August (it’s at $2,450 now). “The market’s pricing in more pain,” says a BTCC desk note.

Expert Take: Should You Buy the Dip?

Crypto influencer Lark Davis remains bullish: “ETH’s Shanghai upgrade next quarter could be a game-changer.” But JPMorgan warns of “further downside if BTC breaks $48K.” My two cents? Dollar-cost averaging beats timing the market.

FAQs: Your Ethereum Crash Questions Answered

How low could Ethereum go?

Technical analysis suggests $2,100 is the next major support level. A break below that could see ETH test $1,800.

Will Ethereum recover?

Long-term, yes—Ethereum’s developer activity and institutional adoption remain strong. Short-term? Brace for volatility.

Is now a good time to buy Ethereum?

This article does not constitute investment advice. That said, ETH is 62% below its ATH—historically a decent entry point.