Despite the inclusion of whales in the strategic reserve, Ethereum has dropped 15% to $2,000.
Is a decline to $1,900 now a real possibility?
The price action of Ethereum [ETH] has turned brutal, as ETH fell 15% to $2,000, marking its lowest level since November. The breakdown breached critical support, and whale-driven sell-offs eliminated all post-election gains.
Even the “anticipated” boost from Ethereum’s inclusion in the strategic reserve did not halt the outflow, with ETH ETFs bleeding $51.36 million.
With increased selling liquidity and “extreme” fear dominating the market, defending key levels remains a challenge. If the bulls fail to hold this line, a drop to $1,900 becomes increasingly likely.
Focus on Internal and External Factors
Following Donald Trump’s tweets regarding the “potential” strategic reserve, the cryptocurrency market cap surged 8%, briefly reclaiming the $3 trillion mark.
However, at the time of writing, it had sharply retraced, dropping 10.20% to $2.78 trillion. An astonishing $220 billion was wiped out within just 24 hours. Clearly, market volatility remains high.
In such a climate, while an immediate rebound for Ethereum seems unlikely, the 15% drop has pushed prices toward a critical demand zone. This presents potential accumulation opportunities for those eyeing discounted entries.
However, on-chain indicators suggest weak buyer interest.
The Coinbase Premium Index (CPI) remains negative, indicating a lack of demand from U.S. institutions. The trading volume of Ethereum on exchanges has decreased by 5.50%, continuing to exert selling pressure.
Due to a lack of upward momentum, Ethereum faces the possibility of further downside. Unless conditions shift or supply-demand imbalances trigger consolidation, this scenario may be plausible.
Ethereum Crash: Liquidity Issues and Market Sentiment
The sell-off in Ethereum intensified, with long liquidations totaling $168.13 million coinciding with a surge in selling liquidity.
This occurred a day after the market witnessed a new influx of $2 billion into new positions, with open interest (OI) increasing by 10% to $2.111 billion.
However, as futures traders actively closed their positions, OI quickly escalated by 8.39%, exacerbating volatility. They did this to mitigate losses or realize them.
With changes in market liquidity and increasing sell-offs, Ethereum remains susceptible to further declines unless demand triggers a supply shock.
Beyond on-chain indicators, broader market sentiment plays a crucial role.
If Bitcoin’s “dipping” attracts strong accumulation, Ethereum might stabilize. However, given the extreme fear, ongoing deleveraging, and weaker liquidity on the bidding side, a drop to $1,900 seems increasingly probable.
