The entire cryptocurrency market slumped following the massive downside correction breaching crucial levels along the way. Ethereum, the second-largest cryptocurrency, was one of the worst-hit among the top altcoins by the latest price action. While it was just recently that ETH’s price climbed to $470, a level was last seen in July 2018, at the time of writing, however, ETH suffered a loss of nearly 20%.
Ethereum’s rally was not backed by strong fundamentals
Ethereum’s on-chain activity was in a steady decline since mid-August despite its price reaching a 2-year high regardless of the worldwide stock market regression. While it did reach a favorable position in terms of its price, a few metrics, on the other hand, noted opposed the positive sentiment.
As noted by the crypto-analytic platform Santiment, ETH’s daily active addresses [DAA], as well as network growth, appeared to low with respect to its price hitting levels above $400.
While exchange deposits, which is the number of coins held in exchange addresses, declined significantly, the figures for exchange wallets, however, exploded to a 6-month high of 1.09 million ETH signaling the traders were less accumulating and more trading the coin in anticipation of a dip, according to Santiment.
Additionally, according to ITB’s tab, Ethereum’s on-chain metrics signaled bears having an upper hand with respect to its price.
The DeFi factor
Ethereum has been a haven for DeFi protocols. Space has seen a massive inflow of capital over the past few months which has resulted in explosive figures in terms of TVL. While a few ecosystems have shown consistency, others just came and exited the market. It is important to note that DeFi is still in an experimentative phase.
Hence, falling stocks could have propelled DeFi to experience a similar reversal. And as money flowed out of the DeFi, Ethereum and Bitcoin lost significant value causing the altcoins to crash as well.
Bitcoin’s bearishness fades
In the midst of a bull market, Ethereum and its peer altcoins bled. But it was Bitcoin which managed to retain its value above the $10,000-level. The coin’s tryst below the said level was short-lived. One of the big reasons for the swift rebound could potentially be due to the retail dump and not derivatives as BTC futures volume figures remained pretty much unfazed.
In addition, the drop to $9,975 triggered liquidations below $40 million on the crypto exchange and derivatives platform, BitMEX. Generally, a huge price movement, such as this, potentially wipes off $100 million worth of futures contracts.
Besides, the whales could have potentially taken profit off Bitcoin’s price at a crucial resistance of $10,500.