TLDR
- Amidst international economic tensions, Ethereum witnessed a drastic 20% decline, sinking to $2,500, closely trailing Trump's declaration of tariffs targeting Canada, Mexico, and China.
- The market turmoil prompted an unprecedented liquidation spree in the past two years, resulting in over $600 million worth of positions being wiped out.
- In spite of the downward spiral, analysts like Felix Hartmann and Andrew Kang argue that the downturn is fueled by panicked sell-offs and foresee a recovery rally towards $2,700.
- Noteworthy movements among large investors (or 'whales') were reported, with one purchasing 35,494 ETH (equivalent to around $88 million) shortly after the price downturn.
- The reactions in the crypto market appear linked to global financial uncertainties, specifically in Asian markets which have registered significant downturns in indices.
Ethereum's valuation suffered a swift decline, dropping nearly 20% within a day to settle near the $2,500 threshold. The plunge was a response to President Donald Trump’s introduction of fresh trade tariffs impacting Canada, Mexico, and China, causing broader market jitters.
The event marks one of Ethereum's most severe sell-offs, plummeting below the significant $3,000 mark, as part of a larger market response to Trump’s proposed 25% tariffs on Canadian and Mexican goods, and 10% on Chinese imports.
According to Coinglass, a wave of panic selling by major stakeholders contributed significantly to the downturn. The surge in whale activity led to a chain reaction of liquidations, marking the largest Ethereum sell-off in over two years.
The liquidation avalanche was notable, clearing $475.72 million from long positions, and an additional $127.78 million from short positions in the past day. The futures market witnessed a 27% slide in open interest, now at $23.36 billion.
While the market is in turmoil, some analysts remain positive. Crypto trader MaxBecauseBTC, with a following of 66,000 on X, equates the current scenario to the COVID crash of March 2020, asserting that “those persevering will see rewards.”
Largest liquidation event on $ETH over the past 2+ years presenting the most adverse funding conditions… drawing parallels to the March 2020 Covid Crash.
In my view, perseverance will be rewarded. Most will not endure. A pivotal moment for many. We all encounter it. pic.twitter.com/hmZRGuGJAo
— Max (@MaxBecauseBTC) February 3, 2025
Felix Hartmann, the founder of Hartmann Capital, links the downturn to “involuntary liquidation” and suggests that current prices may not accurately represent intrinsic market value. This view is shared by Mechanism Capital's partner Andrew Kang, who believes Ethereum might be undervalued and could rally to $2,700.
The market's fluctuation seems closely intertwined with movements in Asian financial sectors. The Hang Seng index in Hong Kong fell by 2.07%, Japan's Nikkei 225 dipped by 2.27%, with South Korea's KOSPI and Taiwan's weighted index decreasing by 2.87% and 3.74%, respectively.
In the chaos of the market, some encouraging signs have emerged. On-chain data reveals that investors have cumulatively withdrawn$326.7 million of ETH from exchanges over the past three days, hinting at accumulation amid the dip. Typically, this behavior implies some investors are seeing the reduced prices as an opportune time to buy.
Large-scale actions by whales demonstrate a show of faith in the market. According to Onchain Lens, a notable whale procured 35,494 ETH, valued at almost $88 million following the price fall. Additionally, another whale reportedly invested an extra $1 million into ETH during the downturn.
Technical signals offer a varied outlook for Ethereum’s for immediate prospects. The digital currency has fallen below its 50-day and 200-day moving averages, indicating a bearish climate. Nonetheless, the Relative Strength Index suggests an oversold status, which could lead to price stabilization.
The Aroon indicator is signaling a complete 100% for Aroon down and 0% for Aroon up, hinting at extended short-term downward pressure. Yet, historical trends often see assets rebound when oversold.
Georgii Verbitskii, founder of TYMIO, posits that Ethereum might experience a brief upswing toward $2,700 spurred by technical drivers and a brief positive shift in market sentiment. However, he admits that lacking robust catalysts, Ethereum could continue underperforming against Bitcoin.
The newly imposed tariffs are set to be enacted at 12:01 a.m. EST Tuesday. Market stakeholders are vigilantly watching the diplomatic discussions between the U.S. and the affected nations for signs of any potential resolution.
Currently, Ethereum is trading at about $2,500, with the trading volume in the past 24 hours peaking at $86.7 billion, highlighting the influence of recent market shifts.
