Written by: Mia, ChainCatcher
Editor: Marco, 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 fell by more than 10%, and the prices of major cryptocurrencies such as BTC and ETH fell sharply. With the sell-off on Sunday night in the US time period, BTC plummeted to its lowest level since March, and ETH has been "halved" compared to the high of $4,000 on March 12. In the past 24 hours, ETH fell by more than 20%, and the weekly decline was more than 30%, which has completely wiped out the gains since the beginning of this year.
As the market plummeted, wailing was heard everywhere.
Why did ETH plummet?
The yen appreciates, and the world pays for it
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 the cryptocurrency market. 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 stance of the Bank of Japan, the policies of the US Federal Reserve (Fed) have also added to market uncertainty. Although the Fed kept interest rates unchanged, its ambiguous attitude towards the September rate cut surprised market participants. Originally, almost everyone believed that the rate cut was a foregone conclusion, but the Fed's vague words made the market begin to reassess its policy direction.
Market Makers Front-running
Behind the ETH plunge in this wave of international financial environment, the large-scale transfer of tokens by market makers 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 shows that Jump Crypto's address has received about $300 million since August 3, most of which came from exchange wallet addresses. At the same time, the exchange's wallets saw an outflow of about $80 million during the same period, mainly to exchanges such as Coinbase, Gate.io, and Binance. The flow of funds is still ongoing, and most of the funds in the flow are in the form of ETH.
In fact, according to cryptocurrency sleuth EmberCN, Jump appears to have started redeeming more than $500 million worth of Lido’s wstETH in exchange for ETH just days after the launch of the US spot Ethereum ETF on July 25. Jump still holds about $130 million in staked ETH, while nearly $200 million in unstaked ETH has entered exchanges.
In addition, Jump Crypto also transferred USDC, USDT, UNI and SHIB to cryptocurrency exchanges. As more funds flow 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 pessimism about the future trend of Ethereum.
In fact, there have been reports that the U.S. Commodity Futures Trading Commission is investigating Jump Crypto’s cryptocurrency investment activities, which undoubtedly adds more uncertainty to its current moves.
Currently, Jump Crypto's transfer operation is still ongoing.
According to Spot On Chain, JumpTrading has transferred another 17,576 ETH (worth $46.78 million) to CEX in the past 24 hours. Currently, JumpTrading still holds 37,600 wstETH (worth $101 million) and 11,500 STETH (worth $26.3 million). According to Scopescan, 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 monitoring by The Data Nerd, Wintermute transferred 22,460 ETH (approximately US$52 million) from its market-making account and other trading platform accounts to the Binance deposit address in the past 24 hours, and then transferred it to the Binance hot wallet.
In the past 16 hours, Symbolic Capital deposited 4,446 ETH (about 12.16 million US dollars) into Binance, which was then transferred to the Binance hot wallet.
Lever Step
In addition to large-scale ETH transfers, a large number of on-chain loan liquidations are occurring as ETH falls sharply.
According to Parsec data, in the past 24 hours, the lending liquidation volume on DeFi exceeded 320 million US dollars, setting a new high for the year. Among them, the liquidation volume of ETH collateral reached 187 million US dollars, wstETH reached 77.9 million US dollars, and wBTC reached 32.5 million US dollars.
According to 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 whale were not immune to this big drop. According to the on-chain data published by Lookonchain on X, a whale address has been increasing its holdings during the decline of ETH, and recently purchased another 4,000 ETH (worth $12.58 million). Since May 29, the whale address has increased its holdings by 17,012 ETH, worth $61 million, with an average price of $3,587 per ETH. The current price of ETH has fallen to around $2,300, with a book loss of about $21.89 million.
In the context 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, and the level has changed from greed to fear (yesterday's index 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 positives materialized, the market fell
The plunge in ETH is not entirely caused by the current market panic, but is also closely related to the favorable implementation of ETFs.
Since the beginning of this year, the overall crypto market has rebounded, ETH has remained relatively stable and once rebounded above $4,000.
As the ETH ETF process accelerates, the rise of ETH 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 the ETH ETF, the decline of ETH has not been alleviated, but has further intensified, and the ETH ETF has shown a net outflow, with a net outflow of US$341 million in the first week.
Why did the ETH ETF fail to drive up ETH prices as the market expected?
Over-expectation : The gap between market expectations and reality is an important factor. Before the launch of the ETF, the market generally had 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 inflow of funds may not meet this expectation, but instead flow out, causing market disappointment to spread.
Fund 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 fund 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. Currently, Ethereum has not yet developed convincing applications to improve its economic benefits. Key indicators such as fee income and annualized income have performed poorly. In the eyes of analysts, its price seems to be somewhat "unworthy". When the market realizes this, it is easy to trigger a reassessment of the true value of ETH, leading to an increase in selling behavior.
In fact, the launch of the ETH ETF in a sense also marks that the market has entered a new stage. Investors have begun to re-examine the value and risks of cryptocurrencies. This market adjustment may lead to a reallocation of funds, which will most likely trigger certain technical selling. Some investors may use ETFs as a hedging tool to balance their portfolios by selling ETH.
Currently, under the dual pressure of ETF failing to meet expectations and the overall financial environment, Ethereum still faces many challenges in the market in the short term.
