Ethereum, the second-largest cryptocurrency by global market capitalization, recently sent shockwaves through the cryptocurrency world. Today, its price plummeted nearly 4.84%, dipping to $3,312. This drop, combined with a weekly plunge of roughly 8%, has left cryptocurrency market participants and investors bewildered, sparking conjectures concerning the volatile landscape of crypto. However, following ETH price’s recent ascent to $4k in the past 30 days, this slump arrives accompanied by a multitude of reasons that triggered a bearish market trend for Ethereum. Here’s a short examination of the potential factors that may have caused the recent slump of Ethereum.
What are the reasons behind the ETH downturn?
Ethereum’s sudden and sharp descent could be attributed to a confluence of factors that eroded investor confidence.
ETH Exchange Influx Surges Amid Regulatory Uncertainty Ethereum recorded its largest weekly exchange inflow today, ever since September 2022. With a staggering value of $720 million, this weekly inflow mirrored rising investor fear, uncertainty, and doubt (FUD), as potential news of an ETH ETF in legal discussions painted an unclear picture across the market.
Ethereum (ETH) Bearish Trend in Derivatives Data
Ali Martinez, a well-known crypto market analyst, spotlighted $1.47 billion worth of ETH exchange inflow documented in the last 3 weeks. This collectively added a shade of bearish vibes to Ethereum, suggesting a combination of selling pressure, profit-taking behaviors, and negative market sentiment, aligning with the token’s recent price movement.
According to the derivatives data, ETH saw a substantial decline in its open interest, volume, and open interest-weighted funding rate, coinciding with today’s slump. Open interest dropped 2.98%, reaching $13.01 billion, whereas volume dropped 38.87%, reaching $39.29 billion.
This showcased a significant decrease in new investments entering the token’s derivatives market, further accompanied by reduced market activity. Coupled with the open interest-weighted funding rate of 0.0191%, bears’ dominance in the market validated ETH’s present decline.
The SEC investigation against the Ethereum Foundation
The US Securities and Exchange Commission (SEC) has launched an investigation into Ethereum (ETH). Many in the cryptocurrency community are puzzled by the question of why the regulator decided to take on the project now
Financial lawyer Scott Johnson explained why the SEC could begin an investigation into the non-profit organization Ethereum Foundation. However, all his words are just assumptions, which the expert turned into three theories. Johnson believes that the reason for initiating a campaign against Ethereum could have been restless officials. In particular, we are talking about cryptocurrency skeptics who demand tougher actions from the SEC against the crypto industry.
The regulator’s reputation among American politicians was greatly damaged by the decision to approve spot Bitcoin ETFs in January of this year. Thus, the Commission’s move was criticized by Senator Elizabeth Warren, who called the approval of the funds a mistake.
The investigation against the Ethereum Foundation could be used as a reason to reject a spot ETF for a second cryptocurrency. Thus, the regulator will show that ETH is not a safe asset at all, so the SEC will not approve the instrument for the benefit of investors.
Market Sell-Off
Meanwhile, the crypto market witnessed substantial liquidations in the past 24 hours, with 82,047 traders facing liquidation totaling $223.23 million. Notably, OKX witnessed the largest liquidation order valued at $1.76 million on OKX – ETH-USDT-SWAP.
At the sametime, Ethereum liquidations are reaching $49.16 million over the past 24 hours, primarily from long traders at $32 million and short traders at $17.16 million. This significant liquidation further fueled the bearishness on Ethereum, reflecting the crypto realm’s heightened volatility.
