Author: PANews, Frank
On February 3, the cryptocurrency market experienced another dark moment, with the entire cryptocurrency market experiencing a sharp decline in a short period of time. Within 24 hours, the number of liquidated positions across the network reached 720,000, with a total value of $2.21 billion (due to incomplete data collection, Bybit CEO Ben Zhou estimated that the actual data may reach $8 to $10 billion). Of this, $1.87 billion were long positions and $340 million were short positions. Ethereum was particularly notable in this round of plunge, dropping as much as 25% in a single day, marking the largest single-day decline in nearly four years (since May 2021). Furthermore, the total liquidation value of Ethereum on that day reached $380 million, exceeding the liquidation value of Bitcoin contracts.
After this wave of liquidations, the market's disappointment with Ethereum has reached a peak. There are also rumors that some industry whales or institutions were liquidated in this round of market movements, which led to the plunge in ETH. So, after experiencing this storm, what is the current fundamental situation of Ethereum? PANews analyzes Ethereum from multiple aspects, including contract holdings, ETF fund inflows, on-chain data, and token inflation.
Price erases a year's gains, contract holdings reach new highs
First, from the price perspective, Ethereum touched a low of $2,125 in this round, which is not as low as the $2,111 seen in August 2024. However, the daily volatility was greater this time, which was highly destructive to the contract market. From the recent high of $4,107 to the low, the nearly 50-day correction was around 48%, with the price almost returning to the level seen in early 2024. This is the reason for the long-term holders' frustration.
Although Ethereum's market performance has not been impressive in the past year, the open interest in Ethereum contracts on various exchanges has been increasing and has repeatedly hit new highs. According to Coinglass data, as of January 31, the total contract holdings of Ethereum reached $30 billion, while when Ethereum reached its historical high of $4,800 in 2021, this figure was only $11.4 billion. With the market plunge, as of February 5, the open interest in Ethereum contracts on major exchanges has dropped to $23.7 billion, a decrease of nearly $7 billion.
The comparison of holdings and price changes shows that there seems to be a huge difference between Ethereum's market expectations and actual expectations, leading to continuous capital betting and causing the violent fluctuations in this round of short-term decline.
US spot ETF market buying the dips recently?
In terms of Ethereum ETF fund inflows in the US, since November 6, we can see that the net inflows of Ethereum ETFs have increased significantly. The highest single-day net inflow was $428 million on December 5. Of course, with the large fluctuations in Ethereum's price, the amount of daily net inflows and outflows has also increased significantly. On January 8, the single-day ETF net outflow reached a record high of $159 million. On February 3, although Ethereum's price experienced a plunge and the contract market suffered heavy losses, the ETF funds did not experience outflows, but instead set the third highest single-day net inflow record of $300 million on February 4. This suggests that traditional market institutions in the US may be buying the dips in this range.
As of February 4, the current total net asset value of Ethereum ETFs is about $10.37 billion, accounting for 3.15% of Ethereum's market capitalization. In comparison, the total net asset value of BTC ETFs is about $116 billion, accounting for about 5.93% of the market capitalization, which is significantly higher than Ethereum. From this data, the current impact of ETFs on Ethereum's market trend is still relatively small.
On-chain data stagnant, staking volume continues to outflow
Of course, this round of decline is essentially caused by other macroeconomic factors. Ethereum's plunge is just the most vulnerable link in this round of decline. From the on-chain data, the number of active addresses on the Ethereum network just hit the second highest point in a year at 553,000 on January 25, and has been declining since then. In terms of on-chain revenue, the revenue level of the Ethereum mainnet is far below the same period a year ago, with the low point only around $1 million per day. This may also explain why the net inflow of staking volume on the chain has been negative since mid-November.
Data shows that since mid-November 2024, the net inflow of Ethereum staking volume has been negative for 2 weeks, with a maximum single-day net outflow of 181,000 ETH. Based on the current data, this metric is still below the 0 axis, which is the longest period it has remained below the 0 axis since the Shanghai upgrade. Previously, from April 12 to April 30, 2023, it had maintained a net outflow for more than half a month, with a maximum correction of about 16%. This time, the net outflow has lasted for 84 days, and the price has corrected by nearly 50% from the high point.
In terms of staking volume, this data reached a historical high of 34.95 million ETH on November 10, 2024, with 1.09 million stakers. This data is currently showing a downward trend, with the current staking volume at around 34 million ETH and the number of stakers at around 106,000.
In addition to the above, Ethereum's inflation has also become a focus of market attention recently. After Ethereum's transition from POW to POS, the market's expectation for Ethereum's supply was that it would achieve a deflationary model through token burning. However, it has been found recently that after a year of deflation and inflation, the increase in Ethereum tokens has completely offset the previous deflation caused by burning, and as of February 5, Ethereum's inflation rate has returned to 0% again, no different from before the merger. The analysis shows that the main reason for this change is the reduction in on-chain token burning caused by the Dencun upgrade.
However, even so, the inflation rate under the POS model is still far lower than the POW model. At the same time, Ethereum's current inflation rate is also lower than BTC.
Overall, Ethereum's current market volatility has both external factors such as the impact of macroeconomic factors on the overall market, as well as internal factors such as the continuous rise in contract holdings, the continuous increase in bets, and the poor performance of on-chain data, leading to its sustained weakness. The final result is that both long and short positions have decreased significantly, and after the plunge on February 3, the price has quickly rebounded to above $2,900. At the same time, the capital of the US spot ETF market has generally shown an inflow trend, reflecting the divergence between the spot market and the futures market.
Going forward, the key factor that may truly drive the market rebound may be whether the various activity data of the Ethereum ecosystem can truly see actual growth. Otherwise, the short-term trend will still be difficult to predict, and for investors who are keen on leveraged trading and contracts, both buying the dips and shorting are fraught with risks.
