Ethereum "Halved": Crypto Market Turmoil Amid Financial Fears

Ethereum "Halved": Crypto Market Turmoil Amid Financial FearsThe global financial market turmoil is sweeping the cryptocurrency market. Over the past 24 hours, the global cryptocurrency market capitalization has dropped by over 10%, with major cryptocurrencies like BTC and ETH experiencing significant price declines

Ethereum "Halved": Crypto Market Turmoil Amid Financial Fears

The global financial market turmoil is sweeping the cryptocurrency market. Over the past 24 hours, the global cryptocurrency market capitalization has dropped by over 10%, with major cryptocurrencies like BTC and ETH experiencing significant price declines. Among them, the price of Ethereum (ETH) has seen a particularly sharp drop, falling below its lowest level since March and effectively being "halved" compared to its peak of $4,000 on March 12th. What exactly has caused this plummeting of ETH?

Yen Appreciation, Fed Policy, and Market Maker Sell-Off Trigger Market Panic

This turmoil in the cryptocurrency market is inextricably linked to recent significant changes in the global financial markets. At the beginning of August, the Bank of Japan announced a 25 basis point interest rate hike. This tightening of monetary policy led to a sharp appreciation of the yen, impacting global stock markets, including US stocks and the cryptocurrency market. The Nasdaq index has fallen by over 5% in the past two trading days, and Nasdaq futures even plunged by 2.5% on Sunday night.

Apart from the Bank of Japan's hawkish stance, the Federal Reserve's policy has also added to market uncertainty. While the Fed kept interest rates unchanged, its ambiguous stance on whether or not to cut rates in September surprised market participants. While nearly everyone anticipated a rate cut, the Fed's statement has prompted the market to re-evaluate its policy direction.

In this uncertain financial landscape, market makers have been moving large volumes of tokens, sparking speculation about potential large-scale asset sales. It has been reported that JumpCrypto recently transferred hundreds of millions of dollars worth of cryptocurrency to exchanges, with a significant portion originating from exchange wallet addresses. The outflowing funds mostly went to exchanges like Coinbase, Gate.io, and Binance. The flow of funds primarily involved Ethereum (ETH), fueling market expectations of a decline in ETH price and creating panic.

Market Maker Fund Transfers Spark Concerns

JumpCrypto's fund transfer activities have sparked further speculation. Reports suggest that since the launch of the US spot Ethereum ETF on July 25th, Jump appears to have begun redeeming over $500 million worth of Lido's wstETH and exchanging it for Ethereum (ETH). Currently, Jump still holds around $130 million in staked ETH, while nearly $200 million in unstaked ETH has already entered exchanges. Additionally, JumpCrypto has also transferred assets like USDC, USDT, UNI, and SHIB to cryptocurrency exchanges.

With more funds flowing to exchanges, market observers have begun speculating whether Jump is preparing to liquidate hundreds of millions of dollars worth of cryptocurrency assets. As a key market participant, JumpCrypto's large-scale selling would undoubtedly put immense pressure on the market, particularly during the sensitive period following the ETF launch. This behavior is being interpreted by the market as a signal of a pessimistic outlook on Ethereum's future trajectory.

In fact, there have been prior reports indicating that the US Commodity Futures Trading Commission is investigating JumpCrypto's cryptocurrency investment activities. This undoubtedly adds more uncertainty to its current actions. Notably, JumpCrypto's fund transfer activities are still ongoing. According to SpotOnChain monitoring, JumpTrading has once again transferred 17,576 ETH (worth $46.78 million) to centralized exchanges (CEX) within the past 24 hours. Currently, JumpTrading still holds 37,600 wstETH (worth $101 million) and 11,500 STETH (worth $26.3 million). Data from Scopescan shows that JumpCrypto has deposited $91 million worth of ETH to its Binance deposit address since last Friday.

Beyond JumpCrypto, other market makers and venture capital firms are also conducting large-scale ETH transfers. Monitoring by TheDataNerd reveals that Wintermute transferred 22,460 ETH (approximately $52 million) from its market-making accounts and other trading platform accounts to Binance's deposit address within the past 24 hours. Subsequently, these funds were moved to Binance's hot wallet. Within the past 16 hours, SymbolicCapital has also deposited 4,446 ETH (approximately $12.16 million) to Binance, which was later transferred to Binance's hot wallet.

Leveraged Liquidations Amplify Market Decline

Besides large-scale Ethereum fund transfers, as Ethereum prices plummet, numerous on-chain lending liquidation events are occurring frequently. According to Parsec, over the past 24 hours, total loan liquidations on DeFi platforms have exceeded $320 million, reaching a new high for the year. Specifically, liquidations of Ethereum collateral amounted to $187 million, wstETH to $77.9 million, and wBTC to $32.5 million.

Monitoring by on-chain analyst Ember reveals that the sharp drop in Ethereum prices this morning forced some accounts holding large amounts of Ethereum and using leverage to liquidate, further accelerating Ethereum's price decline by over 20%. In fact, even some large Ethereum holders have not been spared in this market downturn. According to data released by Lookonchain, a large Ethereum holding address continued to buy the dip during the market decline, recently purchasing 4,000 ETH, worth $12.58 million. Since May 29th, this address has accumulated a total of 17,012 ETH, amounting to $61 million, with an average purchase price of $3,587 per ETH. However, the current Ethereum market price has fallen to around $2,300, resulting in a loss of approximately $21.89 million for these holdings.

Against this backdrop of a turbulent cryptocurrency market, ordinary investors' confidence has been severely shaken. Data shows that today's Fear & Greed Index has dropped to 34, down from 37 yesterday, entering the Fear level. Many investors are gripped by panic, and panic selling further accelerates the downward trend in the market, creating a vicious cycle.

ETH's Plunge Also Related to ETF Hype Realization

The plummeting of ETH is not entirely due to current market panic but also closely related to the realization of ETF hype. Since the beginning of this year, the overall cryptocurrency market has warmed up, with ETH remaining relatively stable and even rising above $4,000 at one point. As the ETHETF process accelerated, ETH's rise appeared to have lost momentum.

The launch of ETHETF is widely considered to be bullish news. However, the reality has contradicted expectations. After the official launch of ETHETF, ETH's decline not only failed to ease but intensified, while ETHETF has seen net outflows. The first week saw a net outflow of $341 million.

Why did ETHETF not boost ETH prices as the market anticipated?

• Excessive Expectations: The gap between market expectations and reality is a significant factor. Before the launch of the ETF, the market harbored excessive expectations, believing it would bring a large influx of new funds to ETH, creating substantial upward potential for ETH. However, the actual inflow of funds might not have met these expectations, even seeing outflows instead, leading to widespread market disappointment.

• Fund Flows: The actual net buying volume of ETHETF is far lower than market expectations. Although ETF front-end derivative flows are substantial, actual funds flowing into ETH are limited, insufficient to support its price rise. Conversely, due to excessive market expectations, when actual fund inflows are insufficient, it is more likely to trigger market sell-off behavior.

• Investor Preferences: Ethereum (ETH) is widely regarded as a technology asset, primarily attracting investors like venture capital firms, cryptocurrency funds, and technology experts. Comparatively, Bitcoin (BTC), as a macro asset, is more favored by institutional investors like macro funds and pensions. Therefore, Ethereum might face more challenges in attracting a broader investor base. If ETHETF fails to attract enough broad investors after its launch, it could lead to market supply and demand imbalances.

• Economic Benefits: While Ethereum is innovative in terms of technology, its actual economic benefits are not enough to support its current high valuation. Currently, Ethereum has not developed compelling applications to enhance its economic benefits. Key metrics like transaction fee revenue and annualized revenue performance are poor. In the view of analysts, its price appears disconnected from economic fundamentals. Once the market realizes this, it could trigger a reassessment of Ethereum's true value, leading to increased selling pressure.

In fact, the launch of ETHETF marks, in a sense, the market entering a new phase, as investors begin to re-evaluate the value and risks of cryptocurrencies. This market adjustment could lead to fund reallocation, potentially triggering technical selling. Some investors may utilize the ETF as a hedging tool, balancing their portfolios by selling ETH.

Currently, under the dual pressure of ETF underperformance and the financial environment, Ethereum still faces multiple challenges in the market in the short term.