Ethereum Price Prediction: Whale Withdraws $600 Million in ETH, Capital Dumping Leads to Formation of $3860 "Local Top"

The price of Ethereum (ETH) seems to be struggling with a rebound, currently reported at $3,677 in the early Asian session today (25). After experiencing a parabolic surge of 50% in just one month, Ethereum is undergoing a pullback—this is a typical pattern in the crypto assets market. As the RSI cools down, the market begins to seek liquidity from long positions, and investor sentiment quickly reverses.

Typically, such adjustments are seen as a necessary "reset"—clearing excessive leverage and bringing financing rates back to balance. Theoretically, this is exactly when the "smart money" begins to quietly accumulate.

However, for Ethereum, an unexpected factor completely changed the situation: ETH worth 600 million dollars was withdrawn from its ecosystem. The market not only failed to welcome a healthy pullback but instead faced structural risks in the Ethereum DeFi space—this is a warning that cannot be ignored.

Aave Exhausted, Ethereum Yield Engine Malfunctioning

Aave (AAVE) has long been an important liquidity hub in the Ethereum DeFi ecosystem. The entire system relies on a strong liquidity buffer to maintain the delicate balance between borrowing and lending rates. However, this balance has just suffered a severe impact.

It all started when a well-known wallet address suddenly withdrew $600 million worth of ETH from the system, creating a huge liquidity gap. As a result, the ETH reserves on Aave were nearly depleted.

(Source: X)

What are the consequences? The volatile ETH lending rates have surged, exceeding 10.06%, making the cost of using financial leverage extremely high. Among them, the most severely impacted are the "cycle traders"—who rotate between stETH and ETH to optimize staking returns.

The strategy works as follows: Users stake ETH through Lido to obtain stETH, and then use stETH as collateral to borrow ETH on Aave. The borrowed ETH is then staked again, forming a leveraged cycle to maximize returns.

For example, if someone stakes 100 ETH, they will receive 100 stETH, deposit it into Aave, borrow 80 ETH, and then continue to stake, repeating this cycle. When the borrowing rate is low, this is a quite attractive source of income, and it could even double the staking returns.

But when the borrowing cost skyrocketed to over 10%, the cycle collapsed. Traders were forced to liquidate their positions, leading to a wave of stETH sell-offs in the market, causing the stETH to ETH exchange rate to drop slightly.

Capital outflows have slowed the rise of ETH

The domino effect quickly spread to the Ethereum market. As circulating users began to sell stETH, the selling pressure spread to ETH, leading to a market crash. Liquidity dried up, slippage occurred, and volatility surged.

At the same time, open contracts fell sharply. In a short period, approximately $150 million in long positions were liquidated—coinciding with a short-term peak in ETH price at around $3,860. This is a typical "local top": the market is overheated, leverage is abused, and a market shakeout is just a matter of time.

Although this pullback did not result in a large-scale sell-off, it has created significant resistance to the upward trend, temporarily halting the rebound momentum of Ethereum.

What is the most noteworthy aspect? It has been proven that Ethereum's DeFi platforms are not as decentralized as many people imagine. A single whale rotation can trigger a liquidity crisis, wipe out leverage, and expose the entire system's vulnerabilities. However, ETH has weathered this crash due to its resilience.

(Source: Trading View)