Ethereum price “halved”, who is behind it?

Author: Mia, ChainCatcher

Amid the global financial panic, the cryptocurrency market has ushered in a new turmoil.

In the past 24 hours, the global cryptocurrency market value has fallen by more than 10%, and the prices of major cryptocurrencies such as BTC and ETH have fallen sharply. With the sell-off on Sunday night in the US session, BTC plummeted to its lowest level since March, while ETH has been "halved" compared to its high of $4,000 on March 12. In the past 24 hours, ETH has fallen by more than 20%, and the weekly decline has exceeded 30%, which has completely wiped out the gains since the beginning of this year.

Under the plunge, wailing is everywhere.

Why did ETH plummet?

Yen appreciates, global buys

In early August, the Bank of Japan announced a 25 basis point rate hike. This monetary tightening policy caused the yen to soar, while Japan's Nikkei stock index fell sharply. This volatility quickly spread to global markets, including the US stock market and cryptocurrency markets. The Nasdaq index fell more than 5% in the last two trading days, and Nasdaq futures fell 2.5% on Sunday night.

In addition to the hawkish attitude of the Bank of Japan, the policies of the US Federal Reserve (Fed) have also increased market uncertainty. Although the Fed kept interest rates unchanged, its ambiguous attitude towards a rate cut in September surprised market participants. Originally, almost everyone believed that a rate cut was a foregone conclusion, but the Fed's vague words made the market begin to reassess its policy direction.

Market Makers Preempt

Behind the ETH plunge in the international financial environment, the large-scale transfer of tokens by market makers has also caused panic in the ETH market.

Recently, Jump Crypto transferred hundreds of millions of dollars worth of cryptocurrencies to exchanges, sparking speculation that it may be preparing to sell a large number of assets.

Data from blockchain analysis platform Arkham show that Jump Crypto's address has inflowed about $300 million since August 3, most of which came from the addresses of exchange wallets. At the same time, the trading company's wallet outflowed about $80 million in the same period, mainly to exchanges such as Coinbase, Gate.io, and Binance. The flow of funds is still continuing, and most of the funds in flow are in the form of ETH.

In fact, according to cryptocurrency sleuth EmberCN, Jump appears to have begun redeeming more than $500 million worth of Lido's wstETH in exchange for ETH a few days after the launch of the US spot Ethereum ETF on July 25. Jump still holds about $130 million in pledged ETH, while nearly $200 million in unpledged ETH has entered the exchange.

In addition, Jump Crypto has also transferred USDC, USDT, UNI and SHIB to cryptocurrency exchanges. As more funds pour into exchanges, crypto people are now speculating whether Jump is ready to liquidate hundreds of millions of dollars worth of cryptocurrencies. As an important player in the market, Jump Crypto's selling behavior has undoubtedly brought tremendous pressure to the market, especially in the sensitive period after the launch of the ETF. This behavior is interpreted by the market as a pessimism about the future trend of Ethereum.

In fact, there have been reports that the US Commodity Futures Trading Commission is investigating Jump Crypto's cryptocurrency investment activities, which undoubtedly adds more uncertainty to its current actions.

Currently, Jump Crypto's transfer operation is still continuing.

According to Spot On Chain monitoring, in the past 24 hours, JumpTrading has transferred another 17,576 ETH (worth $46.78 million) to CEX. Currently, JumpTrading still holds 37,600 wstETH (worth $101 million) and 11,500 STETH (worth $26.3 million). According to Scopescan monitoring, after checking Jump Crypto's Binance deposit address, it has deposited $91 million in ETH since last Friday.

In addition, other market makers and VCs are also transferring ETH on a large scale.

According to The Data Nerd, Wintermute transferred 22,460 ETH (about $52 million) from its market-making account and other trading platform accounts to Binance deposit addresses in the past 24 hours, which were then transferred to Binance hot wallets.

In the past 16 hours, Symbolic Capital deposited 4,446 ETH (about $12.16 million) to Binance, which were then transferred to Binance hot wallets.

Leverage stampede

In addition to large-scale ETH transfers, a large number of on-chain lending liquidations are occurring as ETH falls sharply.

According to Parsec data, the lending liquidation volume on DeFi exceeded $320 million in the past 24 hours, setting a new high for the year. Among them, the ETH collateral liquidation volume reached 187 million US dollars, wstETH reached 77.9 million US dollars, and wBTC reached 32.5 million US dollars.

According to the on-chain analyst Ember, ETH fell sharply this morning, causing some leveraged ETH whales to be liquidated, further pushing the ETH price down by more than 20%.

In fact, even whales are not immune to this big drop. According to the on-chain data published by Lookonchain on X, a whale address has been increasing its position in the decline of ETH, and recently purchased another 4,000 ETH (worth 12.58 million US dollars). Since May 29, the whale address has increased its holdings by 17,012 ETH, worth 61 million US dollars, with an average price of 3,587 US dollars per ETH. At present, the price of ETH has fallen to around 2,300 US dollars, with a book loss of about 21.89 million US dollars.

Against the backdrop of such turbulence in the cryptocurrency market, the confidence of ordinary investors has been severely hit. According to data, today's Fear and Greed Index has dropped to 34, with the level changing from greed to fear (yesterday's indicator data was 37). A large number of investors have fallen into panic, and panic selling has further exacerbated the market's downward trend, forming a vicious cycle.

ETF benefits are realized, and the market falls

ETH's plunge is not entirely caused by the current market panic, but is also closely related to the implementation of ETF benefits.

Since the beginning of this year, the overall crypto market has rebounded, and ETH has been relatively stable and once rebounded to above $4,000.

As the ETH ETF process accelerates, ETH's rise seems to lack stamina. The launch of the ETH ETF is generally considered good news by the market. However, the facts are contrary to expectations. After the official launch of ETH ETF, the decline of ETH has not been alleviated, but further intensified, and ETH ETF has shown a net outflow, with a net outflow of 341 million US dollars in the first week.

Why did ETH ETF fail to drive up the price of ETH as expected by the market?

Overexpectations:The gap between market expectations and reality is an important factor. Before the launch of ETF, the market generally had too high expectations for it, believing that it would bring a large amount of new funds to ETH and bring significant room for ETH to rise. However, the actual capital inflow may not meet this expectation, but instead it is in a state of outflow, leading to the spread of market disappointment.

Capital Flow:The actual net purchase amount of ETH ETF is far lower than market expectations. Although the flow of ETF front-end derivatives is large, the actual funds flowing into ETH are limited and insufficient to support its price increase. On the contrary, due to the high market expectations, when the actual capital inflow is insufficient, it is more likely to trigger a sell-off in the market.

Investor Preference:ETH is more regarded as a technical asset, mainly attracting investors such as venture capital firms, Crypto funds, and technical experts. In contrast, BTC, as a macro asset, is more attractive to more attractive institutional investors such as macro funds and pensions. Therefore, ETH may face more challenges in attracting a wide range of investors. When the ETH ETF is launched, if it fails to attract enough broad investors, it will easily lead to an imbalance in market supply and demand.

Economic Benefits:Although Ethereum is technologically innovative, its actual economic benefits do not support its current high valuation. At present, Ethereum has not yet developed a convincing application to improve its economic benefits, and key indicators such as fee income and annualized income have performed poorly. In the eyes of analysts, its price seems to be somewhat "unworthy of the position", and when the market realizes this, it is easy to trigger a reassessment of the true value of ETH, leading to an increase in sell-offs.

In fact, the launch of ETH ETF also marks a new stage in the market in a sense. Investors begin to re-examine the value and risks of cryptocurrencies, and this market adjustment may lead to a redistribution of funds, which will also trigger some technical selling orders with a high probability. Some investors may use ETFs as a hedging tool to balance their investment portfolios by selling ETH.

At present, under the dual pressure of ETFs failing to meet expectations and the overall financial environment, Ethereum still needs to face many challenges in the market in the short term.