Ethereum crashed strongly by 20% during the previous day to reach $2,500 trading levels. The rapid market drop last year ranked among the worst selling events in recent times because of investors’ fear and economic concerns.
The downturn was following former U.S. President Donald Trump’s verbal threat to raise import duties on Canadian, Mexican and Chinese goods by 25 percent. This has set global financial markets abuzz of heightened risk aversion.
In the light of the instant correlation between cryptocurrency and the traditional financial markets, Ethereum was likewise to a great extent down, as it mirrored the overall market crash.
Whale Sell-Off Triggers Ethereum Liquidation Wave
According to coinglass data, the spike in ETH price hasn’t been caused by the buying of ETH by the regular individual but the selling activities of those large ether holders, commonly referred to as whales. It has caused a wave of liquidations and the downward spiral accelerates further.
This, according to Crypto trader MaxBecauseBTC, who has more than 66,000 followers on X (previously Twitter), is the biggest Ethereum liquidation event since over two years.
The current situation reminded him of the March 2020 COVID crash, and compared with his recent experience of March 2020 COVID crash, he viewed that the negative funding rates demonstrate an unprecedented high level of pessimism in the market. But he dreams they will be rewarded if they stick around.
Ethereum Fundamentals Remain Strong Despite Price Drop
Despite selling off sharply, some experts are now saying Ethereum sell off may be exaggerated. The event as ‘forced selling’ according to one of the organizers, Felix Hartmann who founded Hartmann Capital, claimed that current prices may not really reflect the true price of Ethereum in the market.
Similar to this was Andrew Kang, a partner at Mechanism Capital, who stated that ETH may be oversold and will rally back towards $2,700. Although short term volatility is yet high, the fundamentals of Ethereum are still strong, analysts say.
Depending on how much sentiment stabilizes, we could see relief in ETH in the next couple of days. But don’t be fooled, investors still have to remain vigilant as macro factors and regulatory decisions will still matter in the future of the cryptocurrency market.
Ethereum traders and investors continue to watch the charts, waiting for some sort of stabilization in an otherwise volatile market.
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