Why has Ethereum crashed? The Internet wants answers!
Let’s see if technical analysis can help.

Reason 1 - ETH’s price is correlated to BTC’s price:

This is THE number one reason for the ETH crash. ETH gets his value from BTC. Period.
Charts don’t lie guys:

I should also add that while ETH’s price is currently correlated to BTC’s price, the opposite does not seem to be true so that while a BTC dump would wreck havoc on ETH's price, a ETH crash would only see lots of money flock back to BTC.

As much as ETH fanatics are chanting the death of BTC on Reddit, the reality is that the actual death of BTC would spell a world of pain for every single altcoin as they would experience a dramatic loss of their $ value and that is because BTC’s fiat value underlines the fiat value of the whole cryptoverse.

Reason 2 - Dumb money loves trading ETH:

People are very excited about ETH and one has to admit that ETH is a potentially revolutionary technology.

BUT...

The recent hype around ETH has drawn lots of mainstream adopters to ETH, people who do not have technical knowledge of trading, people who can't read chart, people who treat trading like gambling.
These lambo dreamers came late to the party, bought ETH at a considerable premium ($300?400$?) and dumped their bags at the first sign of blood on the chart, thus accelerating the crash.

The hard truth is, the days of +6000% gains in ETH are behind us folks and those who bought back down in the gutter are the only ones who have made serious money in the ETH/fiat market and, in my opinion, these people who hold cheap ETH should seriously consider selling SOME of their coins to lock in hard profit before the altcoin bubble pops.

Reason 3 – ETH/$ markets are not very liquid:

Liquidity is the volume of activity on a market at a given time: ie buy orders placed in fiat/BTC against sell orders placed in tokens (BTC, ETH,etc.)

High liquidity translates to high resistance to dumps as large sell orders can easily be absorbed by existing buy orders on the market.
Low liquidity on the other hand means that very large sell orders will have to buy a bigger portion of the order book to fill entirely.

The problem here is that not every ETH/fiat is equal in terms of liquidity, compare the most liquid ETH/fiat market, the Korean exchange Bithumb, with the liquidity on G-DAX which is the market mover on the BTC/$ market:

Now if you want to convert a large sum of ETH to dollars (from an ICO for example), you will have to sell on G-DAX since Bitfinex has suspended $ withdrawals but as we've seen, G-DAX is a fairly illiquid market (despite being THE most liquid ETH/$ market).

Selling large amounts regardless of liquidity unfortunately exposes you to slippage (a very large portion of the order book is used to fill a massive sell order).

A prime example of how slippage can wreck a market was the infamous GDAX “flash crash” when a massive market sell order of about 100k ETH sold all the way down to $13 before pending stop orders were activated, which contributed to crash the price further down to $0.13.

So what happened?

Well, my best guest is that a large ICO start-up (Bancor? BAT? STATUS?) dumped their ETH to protect the $ value of their ICO funds against ETH's recent volatility. They used GDAX which was the most liquid ETH/$ market at the time, placed a market sell-order, clicked… and the rest is history.

To summarize, because of the reasons stated above, investing in ETH is a very risky move right now because of the extreme volatility of the ETH markets and because the price is so overvalued.
Trading ETH thought is exceptionally profitable because of this same volatility.

If you love ETH I suggest you wait until the price of ETH goes back into accumulation (price action goes flat for an extended period of time) to invest your money into it.

In the meantime, keep a close eye on BTC price at BItcoinWisdom if you want to know where ETH’s price is going.

That’s it for today guys, please comment and upvote if you liked the content.

Dan @tradealert