Ethereum price drops again, what’s behind the crash?

ETF flows also turned negative. Data from SoSoValue shows U.S. spot Ether ETFs recorded about $135 million in net outflows on September 2, their second straight day of redemptions after weeks of strong inflows.

By contrast, Bitcoin ETFs attracted more than $300 million on the same day, suggesting investor demand may be shifting away from Ethereum.

Seasonality fears: “Red September” pattern weighs on Ethereum price

September has long carried a reputation as a rough month for cryptocurrencies, and Ethereum has often been pulled into that seasonal weakness. Historical data shows that Bitcoin (BTC), the bellwether for the market, has averaged losses of nearly 4% every September going back more than a decade. 

Ethereum has shared in this seasonal slump, with past years seeing pullbacks that erased much of the momentum built up during summer rallies. The recurring pattern has been strong enough to earn its own nickname among traders: “Red September.”

The reasons behind this seasonal dip aren’t mere coincidence. Early autumn is typically when investors rebalance their portfolios, with many taking profits after August highs and shifting money into safer assets. At the same time, trading volumes tend to thin out following the summer surge, leaving the market more vulnerable to swings. Add in the uncertainty that often surrounds Federal Reserve decisions in September, and it creates the kind of cautious mood that quickly turns into selling pressure.

This September is already showing signs that the old pattern could be repeating. Ethereum has struggled to break through resistance around $4,500 to $4,550, while sentiment across the market has cooled. The Crypto Fear & Greed Index has slipped into the “fear” zone at 42, its lowest reading since June, suggesting traders are on edge. Combined with ETH’s recent retreat from its late-August all-time high, the seasonal headwinds make it harder for bulls to mount a convincing rally. 

Macroeconomic uncertainty and Fed policy pressure

Ethereum is selling off at the same time traders are bracing for the Federal Reserve’s September meeting. The Fed has held rates at a 23 year high of between 5.25% to 5.50% since July 2023, and while markets are hoping for cuts soon, officials have said they need more proof that inflation is under control. That lack of clarity is weighing on the market as sentiment can swing quickly on macro news.

Fresh data from the Bureau of Labor Statistics underline the problem. Consumer prices rose 3.1 percent over the past year in the latest report, and producer prices are also running above 2 percent. With inflation still above the Fed’s 2 percent goal, investors worry that policy will stay restrictive for longer. For Ether, that means a stronger incentive for traders to lock in gains rather than hold through uncertainty.

If inflation runs hot again or the Fed signals fewer cuts, ETH could face further selling. In past cycles, crypto has been quick to drop when yields spike and the dollar strengthens, as traders rush to reduce exposure. Until the Fed delivers clearer easing, Ethereum will likely remain vulnerable to more downside.