2 Reasons Why Ethereum Slumped 6% Today

As of 2 p.m. ET, Ethereum (CRYPTO: ETH) is among the leading cryptocurrencies investors are seeing fit to sell, in rather abrupt fashion. This token is now down 6.1% over the past 24 hours, and has now come down more than 25% from its all-time high set just a few months back in August.

Of course, zooming out on the chart above, it's clear that investors who have stuck with Ethereum over any extended period of time are doing just fine. This token has seen plenty of double-digit declines in the past. But it's also one I'd argue should play a role in a well-diversified portfolio, at least for those who don't mind a slightly higher risk profile overall.

Let's dive into what's behind Ethereum's decline today and where this token may be headed from here.

Buying activity not enough to offset bearish sentiment

Image source: Getty Images.

The unfortunate reality for many crypto investors is that sentiment (rather than fundamentals) can play a much larger role in the price performance of a given token over most time frames.

There are some in the crypto community who are pointing to some rather promising catalysts as reasons why Ethereum probably should be up over the past 24 hours. I'd argue that the recent news that BitMine, an Ethereum treasury firm, bought more than 82,000 ETH tokens over the past week should be a big enough catalyst to offset bearish sentiment.

However, two key drivers do appear to be leading the charge lower for Ethereum today.

First on the list is a high-profile hack that was just announced, which affected approximately $128 million of crypto on Ethereum chains. A Balancer exploit led to this theft, which accentuates existing uncertainty around security for this massive network.

Second, calls from some intriguing talking heads in the crypto space (this time Robert Kiyosaki) do appear to be playing into investor sentiment right now.

Where will Ethereum head from here?

Given the size and importance of Ethereum's ecosystem to the overall cryptocurrency sector, I'd argue this token will remain a mainstay for most long-term investors seeking some amount of exposure to the long-term growth potential and innovation blockchain technology provides.

As a leading programmable blockchain, Ethereum's network effects are likely to remain robust over the long term, and I continue to think of this token as a buy. That goes double on days like today, when investors see 6% drops in such a short span of time.

Chris MacDonald has positions in Ethereum. The Motley Fool has positions in and recommends Ethereum. The Motley Fool has a disclosure policy.