Ethereum declines as crypto market crash increases bearish sentiment
|- Ethereum risk reversal sunk by 20% on Tuesday following nervousness surrounding the recent crypto market crash.
- ETH liquidated long positions reached $67.37 million in the past 24 hours as short traders prevailed.
- Glassnode shared insights into the recent Ethereum issuance reduction proposal that has sparked criticism from the crypto community.
Ethereum's (ETH) price briefly dipped below $3,000 on Tuesday after tensions surrounding a potential Iran-Israel conflict suppressed the effect of Hong Kong's spot ETH approval. Regardless of the price dump, the recent ETH issuance reduction proposal has made the rounds again following research firm Glassnode's report.
Read more: Ethereum recovers from dip as Hong Kong ETH ETF approval sparks whale buying spree
Daily digest market movers: risk reversal dips, liquidated long positions, ETH issuance
Ethereum headlines the crypto market again with increased attention surrounding it. Here are your key market movers:
- Ethereum investors are showing increased nervousness as ETH risk reversals have sunk 20% on Tuesday, according to QCP Broadcast. Generally, crypto bulls are exercising caution as Bitcoin and other altcoins have also posted losses following the prevalence of the Iran-Israel conflict. QCP further highlights that the market is shorting ETH gamma, indicating a sharp move either upward or downward could be amplified.
- Following the Hong Kong spot ETH ETF approval, the second largest digital asset saw increasing discussions, making it the most trending token among traders, according to data from Santiment. Despite the increased attention, ETH shorts have risen by 54% as bearish sentiment around the digital asset continues increasing.
- The crypto market liquidation heat map validates this as Ethereum has seen over $81.9 million in liquidations in the past 24 hours, according to data from Santiment. Liquidated long positions account for $67.4 million of the total ETH liquidations, with the largest coming from an ETH-USD swap valued at $6 million.
Also read: Ethereum price stagnates as EIP-3074 brings smart contract functionalities to wallets
- The Ethereum Foundation's proposal to reduce ETH issuance still faces criticism despite clarifications that the aim is to maintain Ethereum's status as money and a balance in the network's governance power, according to Glassnode.
The rise of restaking and liquid restaking tokens increases ETH's inflation rate and impacts several ETH holders. "In other words, there is a wealth transfer taking place from a shrinking pool of non-staked ETH holders, towards a growing pool of staked ETH holders," says Glassnode.
As a result, the "real yield" could shift the "role of money" within the Ethereum ecosystem from ETH to liquid staking tokens or restaking tokens because of their significantly high yields. "A side-effect of such a development would be the projects which issue these derivative tokens gaining an outsized influence over the governance and stability of Ethereum's execution and consensus layers," stated Glassnode.
Technical analysis: ETH to trade below $3,301
Ethereum bears prevailed in the past 24 hours as its price has found it difficult to recover from the weekend slump. After a brief move toward $3,300 on Monday, expectations were that it would maintain a sideways movement in the $3,210 to $3,406 range. However, ETH declined further, settling around the $3,000 support.
ETH/USDT 1-hour chart
Read more: Ethereum price recovers slightly as whales begin accumulation spree
Considering current volatility, ETH may trade inside the range of $2,852 and $3,301, both formed on Saturday. A move above the range may see it breaking past the $3,406 resistance of April 7 and testing the 3,618 key level of April 11. A further upward move will see ETH sustain bullish momentum. However, a move below the range will see ETH entering a bearish trend.
Three factors will affect this thesis: the upcoming Bitcoin halving, a potential Iran-Israeli conflict, and the Securities & Exchange Commission’s (SEC) decision on a spot Ethereum ETF.
Ethereum is trading around the $3,000 support at the time of writing.
Ethereum FAQs
Ethereum is a decentralized open-source blockchain with smart contracts functionality. Serving as the basal network for the Ether (ETH) cryptocurrency, it is the second largest crypto and largest altcoin by market capitalization. The Ethereum network is tailored for scalability, programmability, security, and decentralization, attributes that make it popular among developers.
Ethereum uses decentralized blockchain technology, where developers can build and deploy applications that are independent of the central authority. To make this easier, the network has a programming language in place, which helps users create self-executing smart contracts. A smart contract is basically a code that can be verified and allows inter-user transactions.
Staking is a process where investors grow their portfolios by locking their assets for a specified duration instead of selling them. It is used by most blockchains, especially the ones that employ Proof-of-Stake (PoS) mechanism, with users earning rewards as an incentive for committing their tokens. For most long-term cryptocurrency holders, staking is a strategy to make passive income from your assets, putting them to work in exchange for reward generation.
Ethereum transitioned from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) mechanism in an event christened “The Merge.” The transformation came as the network wanted to achieve more security, cut down on energy consumption by 99.95%, and execute new scaling solutions with a possible threshold of 100,000 transactions per second. With PoS, there are less entry barriers for miners considering the reduced energy demands.
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