The crypto market faced a sharp downturn today, driven largely by escalating tensions between the United States and Iran.
Investors turned cautious, sparking broad selloffs across risk assets, with cryptocurrencies taking a significant hit. Total market cap dropped by almost $300 billion in a single day, bringing three-day cumulative losses to around $470 billion.
Analyst Darkfost tweeted that this rapid drop resulted in a lot of automatic liquidations in the derivatives market. Positions worth over $2.5 billion were closed, with about $1.1 billion of that in Ethereum contracts.
Source: X
The large number of sales resulted in a large difference between the Ethereum perpetual market and the spot market, as the derivative markets dropped faster than the spot markets. To bridge this difference, the ETH rates were moved into historically negative territory.
Also Read: Ethereum (ETH) Faces Brutal 20% Crash Warning
Ethereum Funding Rates Hit Historical Lows
For Ethereum on Binance, the funding rates went to -0.028%, which is the lowest since the FTX collapse of 2022, when there was a panic and large liquidations. Overall, the funding rates for the major exchanges went to -0.078, which is a strong indication of strong bearish sentiment.
Although these figures indicate a lot of bearish sentiment, it does not necessarily mean that the market will turn around. This is because the market is still in a cleansing process and not in a rebuilding process.
Technical Indicators Confirm Bearish Momentum
Ethereum is currently trading at $2,405.69, down 10.74% in the last 24 hours, according to data from Tradingview on Feburary 1st. From the daily chart, it is evident that there is a strong bearish trend in the short to medium term.
ETH has been forming lower highs and lower lows since it could not move back into the $3,000-$3,200 range, and the strong fall today has broken key levels of support, including mid-range Fibonacci values and volume profile value areas.
Source: Tradingview
Momentum indicators are also in support of the downtrend. The RSI is at 26, indicating that ETH is oversold, but the declining trend indicates that selling pressure is still strong.
The MACD lines are extremely negative, and the histogram is getting bigger, indicating that the bearish momentum is increasing. The money flow indicators are also indicating that money is leaving the market, thus ensuring that the downtrend is not just a result of illiquidity in the market.
Source: Tradingview
The old support level of $2,600-$2,500 is now a resistance level. The next major support level is between $2,200 and $2,000. Although oversold conditions may lead to short-term rallies, it is likely that the rally will be just a correction unless the price starts to move up with fresh momentum.
Also Read: Ethereum Drops as ETH/BTC Weakens and $12.4 Million Scam Hits Market
