Ethereum Network Experiences Slump: Ether Price Drops 8% Amid Declining Activity
Summary:
On March 19, Ether's price dropped by 8% concurrent with decreased activity on the Ethereum network. This decline was caused by substantial futures liquidations in the derivatives market, amounting to over $110.6 million. The slump in Ethereum network's volume and total value also contributed to the downturn. Traders now watch the $3,100 price level warily, as a dip to this bracket stands to jeopardize $212 million worth of leveraged long positions. Moreover, market analysts foresee a gloomy outlook for Ether's short and medium-term performance.
There's been a recent dip of 8% for Ether (ETH) on March 19, directly linked to a decrease in Ethereum network activity. Since first reaching $4,000 on March 8, a landmark not seen since 2021, this second largest cryptocurrency, when measured by market capitalization, has been on a downward trend. So why did Ether decrease in value this time?
Futures liquidations played a significant role in the Ether's value descending. The feverish impulse to liquidate across the derivatives market was a consequence of the price fall. An unexpected decline took confident investors by surprise, leading to sizable long liquidations. In fact, throughout the last 24 hours, Ether long positions amounting to over $110.6 million have faced liquidations, with an alarming amount of $77 million being discarded in the last 12 hours alone. Triggered by such a substantial volume of long liquidations, traders are now watching the $3,100 price bracket closely. If Ether does dip to that level, leveraged long positions worth $212 million could be up for liquidation.
When long derivative positions are wiped out without a subsequent increase in the trading volume, it negatively impacts the Ether price.
Having said that, Ether's price reductions took place at the same time as Ethereum network's volume took a hit. Over the week of March 19, the Ethereum volume saw a decrease of 6.15%, happening shortly after the pivotal Decun upgrade on March 15. Alongside the volume fall, Ethereum's total locked value (TVL) also decreased an early 8.5% on March 19 during a 24-hour window. The current TVL for Ether, standing at $47.9 billion, is still a daunting $60 billion less than the record high set on Nov. 8, 2021.
Meanwhile, Solana (SOL) has been picking up steam following the memecoin frenzy, which corresponds with the noticeable decrease in volume.
Market analysts are exhibiting a rather pessimistic outlook towards Ether's short and medium-term performance. Market Prophit identified prevalent bearish sentiments among both crowd and 'smart money' investors.
Further leading to the downturn in sentiments are clear hints from major capital groups about the slim probability of a spot Ether ETF being approved. Nonetheless, Fidelity revised their spot Ether ETF application on March 18.
If factors such as global events, newer blockchains, and a dip in volume continue to limit growth, it's likely that investors' enthusiasm for high-risk assets, including the interest in DeFi, could dwindle further. However, on the flip side, the gradual growth in Ethereum network-based protocols and the potential of a spot Ether ETF could act as catalysts of long-term growth for the cryptocurrency.
Please note, investing and trading always carry inherent risks, and each individual is urged to perform their own research prior to making any financial decisions.
Published At
3/19/2024 7:38:11 PM
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