Ether has been criticized from all angles lately, dipping below $2,000, with selling pressure emanating from all angles of the market, including Ethereum founder Vitalik Buterin and derivatives traders.
The second-largest cryptocurrency is currently trading around $1,950, down 60% since August and 42% since January 14.
Its plight can partly be attributed to what analysts are calling the latest cryptocurrency bear market, but ETH itself has underperformed other large caps like BTC, XRP and ADA, which have fallen more than 35% since mid-January.
The divergence from peers has been driven by a wave of selling by Vitalik Buterin and, more recently, derivatives traders.
Onchain analysts pointed to an entity that was offloading large amounts of ETH to decentralized derivatives sites in order to repay loans on Aave.
The wallets involved sold around 47,000 ETH ($120 million) over the past four days, including around 31,700 ETH in just five hours, according to data shared by MLm onchain.
They still have almost 50,000 ETH as collateral on Aave, with around $86 million in USDC borrowed against it. With ETH falling, the position is now close to liquidation, forcing more selling to stay above water.
It’s the kind of feedback loop that ether holders have seen before: prices fall, collateral weakens, debt is paid off, more ETH hits the market.
ETH falls harder than others
Part of Ether’s particularly sharp decline is that it remains the go-to asset for leverage in crypto, meaning that when traders are forced to relax, ETH is often what gets sold first.
But it also reflects a market that is currently struggling to find a reason to buy.
Former White House Communications Director Anthony Scaramucci believes ETH is in trouble due to institutional investors’ preference for Bitcoin.
“I think when institutions come in, they’ll probably buy the oldest asset,” Scaramucci said in an interview with OANDA. “And so it’s Bitcoin. Now, are you going to say if they could potentially buy Ethereum? I would say yes… But I would say that in general, institutions are going to favor something like Bitcoin. And that’s not to say that it won’t catch on in the years to come, but that’s where things are right now.”
There is also a segment of the market that attempts delta-neutral trading, buying ETH in spot and lending it out on platforms like Aave, while simultaneously selling the asset on futures contracts. These traders do not have directional exposure, but may need to increase their short position if funding rates adjust, which could lead to increased selling pressure.
Treasury buyers feel it too
One of the most bullish developments for ether over the past year has been the rise of ETH treasury companies – companies that buy and hold ETH as part of a MicroStrategy-style bet.
The idea was that businesses would constitute a new class of long-term buyers, helping to absorb supply and establish a floor under the market.
This didn’t really happen.
With ETH now down more than 50% since August, many of these companies are sitting on losses, having accumulated to prices that seemed reasonable at the time but painful in hindsight.
Tom Lee’s BitMine (BMNR) is the best-known example. Lee has been a consistent bull on ether, and BitMine’s ETH position has been presented as strategic rather than speculative.
BitMine currently holds 4.29 million ETH tokens, worth $9 billion, of which 57% are staked for yield. Dropstab data shows that a total of $16.3 billion was invested, creating an unrealized loss of $7.3 billion.
The company even bought the dip earlier this month, purchasing $100 million worth of ETH at $2,300, but the purchase failed to stem the steady flow of selling pressure, with ETH subsequently falling below $2,000.
But it is difficult to play the role of “strong hands” when the asset continues to fall and everyone else is selling into weakness.
Instead of serving as support, these Treasury holdings are starting to look like another overhang — not because they’re dumping today, but because the market knows they’re trapped.
No obvious buyer
Ether’s problem right now is not a single wallet or a single liquidation.
That’s because selling pressure is coming from everywhere: founders are reducing their exposure, leveraged traders are unwinding, underwater holders are looking for exits.
Ethereum remains the dominant smart contract platform. None of this has changed.
But in this market, ETH is not trading based on fundamentals. It trades like an asset that no one wants to acquire.
Except apparently Tom Lee.
