In a dramatic turn of events, Ethereum (ETH) has reclaimed the $3,000 mark following a three-day sell-off that saw the cryptocurrency drop 13.8%, hitting the previously critical support level of $2,900 for the first time in four weeks.
The sharp decline coincided with a period of heightened risk aversion in cryptocurrency markets, affecting not only Ether but also major players like Bitcoin. This market shift was underscored by $480 million in bullish leveraged positions being liquidated within just two days.
However, the market sentiment shifted positively when US President Donald Trump announced that he would call off planned import tariff hikes on several European Union countries. This announcement, which Trump made on Truth Social, was part of an ongoing negotiation framework regarding Greenland, leading to optimism that helped bolster ETH’s price.
The recovery above the $3,000 threshold came as a breath of fresh air for traders after a period of pessimism. The conditions leading up to this rebound highlighted the fragility of market confidence, with ETH perpetual futures funding rates turning negative on Wednesday, signaling a significant shift in trader sentiment.
Funding Rates and Market Sentiment
The negative funding rate indicated that short sellers were paying to keep their positions open, a rare occurrence that underscores the current market’s lack of confidence. Under normal conditions, funding rates typically fluctuate between 6% and 12%, favoring long positions. However, the surge in pessimism was clear as market participants demanded an 11% premium to cover downside risk, the highest in seven weeks.
ETF Outflows Bring Caution
In addition to market fluctuations, the Ether exchange-traded funds (ETFs) faced a downturn, witnessing $230 million in net outflows on Friday. This marked a significant reversal from the previous week’s $96 million average net inflows, raising concerns over the sustainability of capital in the Ethereum ecosystem.
Currently, these US-listed Ether ETFs manage assets exceeding $17 billion, with the combined outflow from Bitcoin and Ethereum ETFs nearing $713 million earlier in the week. This situation has triggered accounting losses for firms like Bitmine Immersion and Sharplink, caught in the crossfire of the price decline.
Network Activity Decline
Network metrics reveal declining activity on the Ethereum blockchain. Over the past week, Ethereum network fees have dropped by 20%, while competitors Solana and BNB Chain faced fee increases of 36% and 27%, respectively. Transaction volumes have also been affected, with Ethereum processing below 570 million transactions in the past seven days, while Solana continues to lead in transaction volume.
The market continues to show volatility, with over $1 billion in liquidations occurring in the past 24 hours. This includes roughly $544.16 million wiped away during recent market fluctuations, reflecting the tension among traders.
Beyond Ethereum, Bitcoin’s price fluctuated between $87,500 and $97,500 in the aftermath of Trump’s announcement, highlighting the intertwining relationship between political factors and market dynamics.
As we move forward, the market will be keenly observing both the economic backdrop and regulatory developments to gauge investor sentiment and potential price movements in Ethereum and the broader cryptocurrency landscape.
