Ether (ETH) is facing a challenging start to 2026, having fallen 21% in the first quarter, marking its third-worst Q1 performance in history. The price, which stood around $3,000, dipped to a low of $2,200 on Monday before attempting to recover, highlighting a stark contrast between its price trajectory and robust network activity.
According to Tom Lee, head of research at Fundstrat, this price slump does not reflect the thriving state of the Ethereum network. On January 15, Ethereum recorded an impressive daily transaction rate of 2.8 million, with active addresses reaching the notable milestone of 1 million per day. This surge in activity underscores the platform’s vitality amidst the recent downturn.
Lee suggests that the current situation sets itself apart from previous bear markets in 2018 and 2022, where both transaction activity and user engagement plummeted. He noted, “Non-fundamental factors are arguably more the factors explaining the weakness in ETH prices,” emphasizing that the underlying ecosystem remains strong despite external pressures.
Two main factors appear to be influencing Ether’s declining price, according to Lee. Firstly, the absence of leverage in the market since the significant crash on October 10 has limited speculative trading activity. Secondly, gains in precious metals, particularly gold and silver, appear to have diverted investment away from cryptocurrencies, affecting Ether’s market performance.
BitMine’s Strategic Accumulation
BitMine, Lee’s treasury firm, continues to buy Ethereum even amidst significant unrealized losses. Recently, BitMine acquired an additional 41,788 ETH, bringing its total holdings to 4.28 million ETH, which constitutes 3.55% of the total Ether supply. The firm has staked approximately 2.87 million ETH and is ambitiously targeting a 5% holding of the entire Ether supply.
Lee remarked, “BitMine has been steadily buying Ethereum, as we view this pullback as attractive, given the strengthening fundamentals,” even as the firm faces close to $7 billion in unrealized losses due to the depreciation of ETH.
The most significant price fluctuations occurred last week, particularly following President Donald Trump’s announcement of Kevin Warsh as a candidate to replace Jerome Powell as Federal Reserve Chair, which contributed to a dramatic 25% drop in ETH. The fallout from this announcement played a pivotal role in triggering severe liquidations among futures traders.
Trading Volumes Surge
As traders reacted to the turmoil, ETH’s trading volumes soared to an astonishing $55 billion, accounting for 20% of its circulating market cap, a figure more commonly associated with lower-cap altcoins. This surge indicates extreme trading activity beneath the surface, often absent in major cryptocurrencies like Ethereum.
On January 30, Ethereum saw $1 billion worth of long positions liquidated in one day, marking the second-largest liquidation event on record, surpassed only by the earlier crash in October.
The Fear and Greed Index recently plunged to 15, signifying “Extreme Fear” in the market—this sentiment has been noted for the fourth time over the past twelve months. Contrarily, as ETH began showing signs of stability around the $2,200 support level, investors noted echoes of a previous bounce that occurred when Ether rallied from similar oversold conditions in August 2024.
In summary, as Ether grapples with significant price volatility, the underlying fundamentals signal a potentially brighter future for the network, even as the current market sentiment remains muted.
