Ethereum on route to recovery after sustaining over $380 million in liquidations
|- Ethereum suffered the largest loss among top cryptocurrencies by market capitalization after Jump Crypto sale triggered a series of sell orders.
- Ethereum liquidations have risen above $380 million in past 24 hours as long traders bleed heavily.
- Ethereum exchange net flows have turned negative as bulls may be buying the dip.
- Ethereum could reclaim key support level as buyers are returning to the market.
Ethereum (ETH) is down 11% on Monday after taking heavy losses from the general crypto market crash. While the decline heavily hit long traders, they look set to stage a comeback following increasing exchange outflows.
Daily digest market movers: Macro events, Jump Crypto, ETH exchange outflows
Ethereum, alongside the entire crypto market, went into free fall in the past 24 hours after a series of headwinds were loosed in the capital markets, especially on the crypto side:
- War tension between Israel and Iran, Hezbollah.
- Bank of Japan’s sharp interest rate rise triggers Japanese stock market crash.
- Lower than expected US Nonfarm Payrolls (NFP) data on Friday triggers fears of inflation.
- Genesis Trading and Mt. Gox repay creditors, causing selling pressure.
- Kamala Harris' election odds on Polymarkets rose to 45% since Biden dropped out of presidential race.
Ethereum suffered heavily from these headwinds as it was the most heavily hit among the top 10 cryptocurrencies by market capitalization. Here are some key market movers:
- Jump Crypto — the digital currency arm of Jump Trading — is moving 120,695 wstETH worth about $410 million to exchanges, including Binance and OKX, Lookonchain data reveals. The move follows rumors of Jump Trading's planning to exit the crypto market due to the Commodity & Futures Trading Commission (CFTC) investigating its crypto arm.
Jump Trading is selling 120,695 $wstETH($481M) and has sold 83K $wstETH($377M) since July 24, leaving 37,604 $wstETH($104M).
— Lookonchain (@lookonchain) August 5, 2024
The market also began to fall after July 24, falling by more than 33%!
According to reports on June 20, the US #CFTC is investigating Jump Trading.… pic.twitter.com/pOoGZknUDhJump Trading is selling 120,695 $wstETH($481M) and has sold 83K $wstETH($377M) since July 24, leaving 37,604 $wstETH($104M).
— Lookonchain (@lookonchain) August 5, 2024
The market also began to fall after July 24, falling by more than 33%!
According to reports on June 20, the US #CFTC is investigating Jump Trading.… pic.twitter.com/pOoGZknUDh
Cryptocurrency data aggregators recorded a series of sell orders following Jump Crypto's move.
- Ethereum's decline also affected DeFi protocols heavily as they've seen over $350 million in liquidations in the past 24 hours. Several crypto community members noted on X that a further ETH drop to around $1,700 could spark depegs across several liquid staking tokens and a run on several DeFi protocols.
- Ethereum ETFs had a net outflow of $146 million as Grayscale Ethereum Trust (ETHE) continued to outweigh inflows across other ETH ETFs, as per CoinShares' data.
- After ETH's 24% decline earlier in the day, Ethereum wallet addresses related to Tron founder Justin Sun suffered a loss of about $280 million, according to data from Spot On Chain. These wallets reportedly accumulated 377,590 ETH worth about $1.15 billion at an average price of $3,051.
Following the reports of his unrealized loss, a new address suspected to have the same behavioral patterns as other Justin Sun-related wallets bought 16,236 ETH with 37 million USDT at an average price of $2,279, as per EmberCN.
- The buying activity isn't only peculiar to Justin Sun's wallet, as CryptoQuant's data shows ETH currently has a net exchange outflow of over 100,000 ETH, indicating an increased buy-the-dip move among investors.
ETH Exchange Netflow
ETH technical analysis: Ethereum could reclaim $2,800 support
Ethereum is trading around $2,500 on Monday, down 11% on the day. ETH had earlier dropped 25% before recovering slightly — its largest single-day drawdown since the crypto market crash in May 2021, when prices crashed from $3,500 to around $1,700. The decline sparked a $381 million liquidation in ETH futures, with long and short liquidations accounting for 82% and 18%, respectively.
ETH/USDT Daily chart
ETH lost the key support ranging from $2,852 to $2,803 as buyers could not withstand the selling pressure triggered by the headwinds mentioned earlier. ETH almost touched the lower side of a rectangle — just below the intersection of the 200-day simple moving average — but prices seem to be retracing.
This could be due to major support around $2,340 as 1.23 million addresses purchased about 50 million ETH around this price, according to IntoTheBlock's data.
ETH In/Out of the Money
Meanwhile, ETH's Relative Strength Index (RSI) is at 31.34, dropping sharply below its moving average and nearing an oversold region. The last time ETH's RSI approached this level was in September 2023, after which it reversed quickly, triggering a short-term rally.
ETH could continue the move up and reclaim the $2,803 support if the wider market bearish sentiment cools. On the downside, ETH could find support around the $2,000 psychological level. A move below this level would invalidate the thesis.
Ethereum FAQs
Ethereum is a decentralized open-source blockchain with smart contracts functionality. Serving as the basal network for the Ether (ETH) cryptocurrency, it is the second largest crypto and largest altcoin by market capitalization. The Ethereum network is tailored for scalability, programmability, security, and decentralization, attributes that make it popular among developers.
Ethereum uses decentralized blockchain technology, where developers can build and deploy applications that are independent of the central authority. To make this easier, the network has a programming language in place, which helps users create self-executing smart contracts. A smart contract is basically a code that can be verified and allows inter-user transactions.
Staking is a process where investors grow their portfolios by locking their assets for a specified duration instead of selling them. It is used by most blockchains, especially the ones that employ Proof-of-Stake (PoS) mechanism, with users earning rewards as an incentive for committing their tokens. For most long-term cryptocurrency holders, staking is a strategy to make passive income from your assets, putting them to work in exchange for reward generation.
Ethereum transitioned from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) mechanism in an event christened “The Merge.” The transformation came as the network wanted to achieve more security, cut down on energy consumption by 99.95%, and execute new scaling solutions with a possible threshold of 100,000 transactions per second. With PoS, there are less entry barriers for miners considering the reduced energy demands.
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