The Crypto Assets market has experienced a severe fall, triggering a chain reaction.

Recently, the Crypto Assets market has experienced a serious adjustment. Since the beginning of August, market performance has remained sluggish, with multiple factors contributing to this situation. The escalation of geopolitical tensions, adjustments in the Bank of Japan's policies leading to significant fluctuations in the Japanese stock market, U.S. employment data falling short of expectations, and the spreading concerns about economic recession, along with poor performance from several tech and retail giants, have all taken a toll on market confidence.

On August 5th, as the traditional financial market experienced a significant fall, the crypto assets market also plummeted. According to statistics, the liquidation amount across all exchanges within 24 hours reached up to 1 billion USD, with the liquidation amounts for Bitcoin and Ethereum reaching 350 million USD and 342 million USD, respectively.

On-chain analysis shows that the sharp fall in the price of Ethereum has triggered a series of chain reactions. Several large holders were forced to liquidate their positions to repay loans. For example, one address liquidated 6,559 ETH to repay a loan of 277.9 WBTC; another address liquidated 2,965 ETH to repay a loan of 7.2 million USDT; and yet another address liquidated 2,771 ETH to repay a loan of 6.06 million USDC, etc.

Data shows that within just a week, the price of ETH plummeted from around $3,300 to below $2,200, a fall of over 30%. In addition to the overall market decline, the sharp drop in ETH price is also related to increased market leverage liquidation pressure and significant sell-offs of ETH by certain large institutions.

Some analyses suggest that certain institutions may need to obtain liquidity over the weekend due to being required to post additional margin in traditional markets, or may choose to exit the Crypto Assets business for regulatory reasons. According to on-chain data, several major market makers have recently sold approximately 130,000 ETH.

This series of events triggered a chain reaction, leading to a liquidation amount of up to $100 million for ETH within one hour, with a total liquidation amount exceeding $445 million in 24 hours. The lending liquidations on the DeFi platform also reached a new high this year, totaling $320 million, of which the liquidation amount of ETH collateral was $216 million.

It is worth noting that if the ETH price continues to fall to $1950, $92.2 million worth of DeFi assets will face liquidation risk; if it falls to $1790, this number will rise to $271 million.

Despite the severe adjustments in the market, the fundamentals have not completely collapsed. The market fear and greed index has dropped to 26, which is at a lower level since 2023, and the space for a significant further decline in the short term may be limited.

What is the development prospect of ETH spot ETF?

Compared to the good performance of Bitcoin spot ETFs, the development path of Ethereum spot ETFs seems to be more tortuous. Data shows that despite a certain degree of net outflow in the medium term for Bitcoin spot ETFs (mainly due to sell-offs from a certain fund), the overall cumulative net inflow still remains around $17.5 billion, which is also an important support for the relative stability of Bitcoin prices.

However, the situation for Ethereum spot ETFs is not very optimistic. Due to the launch coinciding with a turbulent macroeconomic environment and a significant decline in the US stock market and other risk asset markets, the cumulative net outflow has reached 511 million dollars, and the total asset scale is relatively smaller compared to Bitcoin ETFs. Among them, a certain fund's ETH ETF accounts for a large portion of the outflow, valued at over 2.1 billion dollars, while other ETF issuers are in a net inflow state.

Nevertheless, the launch of the ETH spot ETF still marks significant progress in regulation for the Crypto Assets industry, with far-reaching implications in the long run. As traditional financial institutions gain a deeper understanding of the ETH fundamentals, it is expected to attract more capital inflows in the future.

The CEO of a certain payment giant stated that, against the backdrop of global macroeconomic fluctuations, more attention should be paid to technology, industry development, and application popularization, rather than short-term price fluctuations. He remains optimistic about the prospects of the encryption industry. Historical data shows that the performance of the Crypto Assets industry is often poor in August and September, but the trend after October is usually more optimistic.

As of August 5, the market capitalization of ETH is approximately $273.4 billion, ranking 37th in the global company market capitalization list, lower than the market capitalization of Coca-Cola and Bank of America, and even lower than the cash reserves of a certain famous investor's company after reducing Apple stock (which is $276.9 billion).

As a leader in the application-oriented public chain of the Crypto Assets field, Ethereum still has great potential in technological application and innovation. This market value decline has also created better layout opportunities for institutional investors. In addition, the market widely expects that the Federal Reserve may start cutting interest rates in September. The Federal Reserve's interest rate cut policy is expected to offset the impact of short-term yen fluctuations, and at that time, the release of market liquidity may bring more capital inflow to the ETH spot ETF.