Ethereum’s Ether just tumbled more than 20% on Tuesday in a two-day rout almost identical to the Oct. 10 crash.
Trading just below $4,000 early Monday, the second-largest cryptocurrency by market capitalization fell to nearly $3,000 by Tuesday afternoon in the U.S., touching its weakest level since mid-July. It is the second severe correction in a month, as the October 10th flash crash took ETH to $3,440 from just $4,500 the previous day, a 25% plunge.
ETH recently traded just above $3,200 after a modest retracement, still down 9.4% over the past 24 hours.
The sharp drop triggered over $970 million in liquidations across leveraged ETH derivatives markets, according to CoinGlass data. Most of these positions were long – traders betting on higher prices – were wiped out as ETH cut through support zones one after the other.
Markus Thielen, founder of 10x Research, warned in a Tuesday note that ETH’s collapse leaves little support underneath and more room to fall.
BitMine, the largest ETH treasury company that has been steadily buying the asset over the past few months, appears to be fully leveraged with limited opportunity to bid for ETH, Thielen said.
BitMine accumulated nearly 3.4 million ETH, with Thielen estimating the firm’s cost basis at about $3,909, which would mean the firm is sitting on about $2 billion in unrealized losses.
“While there is no immediate liquidation risk, the real concern is who will be the next incremental buyer of ETH now that BitMine appears to have exhausted its firepower,” Thielend said.
ETF demand has also fallen. Inflows hit $9.5 billion in July and August as BitMine ramped up purchases, but have since dried up, Thielen noted. Only $850 million has exited ETH ETFs since the October crash, leaving room for more selling as many ETF investors are now underwater at current price levels.
Retail interest has also collapsed, Thielen said. Google search trends, a rough proxy for retail demand, for Ethereum are down to 13% of their peak.
With all the catalysts that led to ETH’s rally to nearly $5,000 in August now gone, Thielen sees the $2,700-$2,800 range as the next likely landing zone.
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