Encryption assets encounter a significant fall, triggering market Fluctuation.

Recently, the cryptocurrency market has experienced a period of intense fluctuation. Since the beginning of August, influenced by multiple factors, including geopolitical tensions, adjustments in Japan's monetary policy, weak economic data from the United States, and poor performance of technology stocks, cryptocurrency prices have remained under pressure.

On August 5th, as traditional financial markets plummeted, encryption assets also experienced a sharp fall. Data shows that the liquidation amount across all exchanges within 24 hours reached 1 billion USD, with Bitcoin and Ethereum contributing 350 million and 342 million USD respectively.

On-chain analysis shows that the significant fall in the price of Ethereum has triggered a wave of on-chain leverage liquidations, with several large holders being forced to sell their held ETH to repay loans. For example, one address liquidated 6,559 ETH to repay a loan of 277.9 WBTC, while another address liquidated 2,965 ETH to repay a loan of 7.2 million USDT.

The data platform shows that in the past week, ETH fell from around $3,300 to below $2,200, with a decline of over 30%. In addition to the increased pressure from market leverage liquidations, news of a large trading company selling a significant amount of ETH also exacerbated the fall.

The CEO of a certain decentralized platform believes that, "The fall of ETH may be related to a certain trading company, as the company may need to obtain liquidity due to being margin called in the traditional market, or it may be exiting the encryption business for regulatory considerations."

According to research reports, the top five market makers recently sold a total of 130,000 ETH. One of them sold over 47,000, ranking first. Nonetheless, another market maker started its sell-off earlier, ahead of other mainstream market makers.

This series of events led to a liquidation amount of $100 million for ETH within one hour, with a total liquidation amount exceeding $445 million in 24 hours. The lending liquidations on DeFi platforms also reached a new high this year, totaling $320 million, of which the liquidation amount for ETH collateral was $216 million.

As ETH fell to around $2100, the Ethereum network became congested, with gas fees reaching as high as 710 gwei. It is worth noting that if ETH continues to fall to $1950, $92.2 million in DeFi assets will face liquidation risks; if it drops to $1790, this number will increase to $271 million.

After this sharp fall, the market's long leverage has significantly decreased, and short-term investors have all exited the market. The market fundamentals have been impacted but not completely destroyed. The cryptocurrency market's fear and greed index has dropped to 26, which is a relatively low level this year, making the possibility of continued significant decline in the short term unlikely.

Prospects for the Development of ETH Spot ETF

The Bitcoin spot ETF data shows that despite a net outflow in the mid-term (mainly due to sales from a certain fund), the overall cumulative net inflow is still around 17.5 billion USD, which is one of the reasons for the relatively strong Bitcoin price.

In contrast, the performance of the ETH spot ETF has been relatively weak. Due to its launch coinciding with a turbulent macroeconomic environment and a general pullback in risk assets, there has been a cumulative net outflow of $511 million, and the total asset size is also much smaller than that of the Bitcoin ETF. Among them, one fund's ETH ETF accounts for a large portion of the outflow, exceeding $2.1 billion, while other ETF issuers are in a net inflow state.

From the perspective of recognition in traditional markets, there is still a significant gap between ETH and Bitcoin. Although the ETH spot ETF is currently just a "supporting role" compared to the Bitcoin ETF, it marks a significant regulatory progress in the encryption industry, with long-term far-reaching implications. As traditional institutions gain a deeper understanding of the fundamentals of ETH, it may attract more capital inflows in the future.

The CEO of a payment company stated, "In the face of global macro Fluctuation, we should focus on technology, industry, and adoption rather than price, and we remain optimistic about the encryption industry." Historical data shows that cryptocurrencies typically perform poorly in August and September, but the trend tends to be more optimistic after October.

As of August 5, the market value of ETH is $273.4 billion, ranking 37th in the global company market value list, lower than companies like Coca-Cola and Bank of America, and even less than the cash reserves of a certain famous investor after reducing his holdings in Apple ($276.9 billion).

As a leading application-oriented public chain of cryptocurrency, ETH has immense potential in terms of technology adoption and innovation. The recent decline in market value may have created better positioning opportunities for institutions. In addition, the market anticipates that the Federal Reserve may initiate interest rate cuts in September, which could offset the impact of a stronger yen. At that time, the release of market liquidity may bring more capital injection into the ETH spot ETF.