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 cryptocurrency liquidations reached 720,000, with a total value of $2.21 billion (according to Bybit CEO Ben Zhou, the actual data may reach $8 to $10 billion due to incomplete data collection). Of this, $1.87 billion was from long positions and $340 million was from short positions. Ethereum was particularly notable in this round of plunge, dropping 25% at one point, marking the largest single-day decline in nearly four years (since May 2021). Furthermore, the total liquidation amount for Ethereum on that day reached $380 million, exceeding the liquidation amount for 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 the market, which led to the plunge in ETH. So, after weathering this storm, what is the current fundamental situation of Ethereum? PANews analyzes Ethereum from multiple aspects, including contract open interest, ETF fund inflows, on-chain data, and token inflation.
Price erases a year's gains, contract open interest hits new highs
First, from a price perspective, Ethereum touched a low of $2,125 in this round, though not as low as the $2,111 seen in August 2024. However, the daily volatility was greater, which was devastating for the contract market. From the recent high of $4,107 to the low, the nearly 50-day correction reached 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, Ethereum's total contract open interest reached $30 billion, compared to only $11.4 billion when Ethereum reached its historical high of $4,800 in 2021. 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 open interest and price changes shows that there seems to be a huge difference between Ethereum's market expectations and actual expectations, leading to continuous capital inflows and causing the violent fluctuations in this round of sharp decline.
Is the US spot ETF market buying the dips recently?
Regarding Ethereum ETF inflows in the US, since November 6, we can see that the net inflows into 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 daily net inflows and outflows have 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 recorded the third-highest single-day net inflow of $300 million on February 4. This suggests that traditional market institutions in the US may be accumulating positions in this price range.
As of February 4, the total net asset value of Ethereum ETFs is approximately $10.37 billion, accounting for 3.15% of Ethereum's market capitalization. In comparison, the total net asset value of BTC ETFs is around $116 billion, accounting for about 5.93% of the market capitalization, significantly higher than Ethereum. This data suggests that ETFs currently have a relatively small impact on Ethereum's market trends.
On-chain data stagnant, staking outflows continue
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, Ethereum's daily active addresses reached the second-highest point in a year at 553,000 on January 25, just before the plunge, and have since been in a downward trend. In terms of on-chain revenue, the revenue level of Ethereum's 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 inflows to Ethereum's staking have been negative since mid-November 2024.
Data shows that since mid-November 2024, Ethereum's on-chain staking net inflows have been negative for 2 weeks, with a maximum single-day net outflow of 181,000 ETH. Currently, this data item 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 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, 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 that after a year of deflation and inflation, Ethereum's new token issuance has completely offset the previous deflation caused by burning, and as of February 5, Ethereum's inflation rate has returned to 0%, no different from before the merger. The analysis indicates that the main reason for this change is the reduction in on-chain token burning after 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 that of BTC.
Overall, Ethereum's current market volatility is driven by both external factors of the overall market being affected by macroeconomic factors, as well as internal factors such as the continuous rise in contract open interest, the continuous increase in bets, and the poor performance of on-chain data, leading to a sustained downturn. The ultimate result is a significant decrease in both long and short positions, and after the plunge on February 3, the price 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 lie in 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 carry significant risks.
