Event Review 📉

Recently, the Ethereum market has experienced significant volatility. Starting from a stable range of about $3105–$3107 before the market opened, the ETH price rapidly dropped to around $2997–$3010 within just 40 minutes, with a decline of 3.1% to 3.5%. Frequent leveraged trading in the market led to forced liquidations of long positions, with reports that well-known trader Machi's 25x leveraged ETH position was partially liquidated, causing his total assets to shrink rapidly to $20.9 million. This series of events triggered a surge in market panic, exacerbating liquidity tightness and a chain liquidation effect. Although there was a brief rebound in the market shortly after, overall, uncertainty still looms.

Timeline ⏱️

• 00:00: Pre-market prices stabilize around $3105–$3107, serving as a baseline for subsequent fluctuations.
• 00:00–00:40: ETH price plummets rapidly from the pre-market high to around $2997–$3010, with a decline of 3.1%~3.5%; during this period, high-leverage positions were liquidated, and panic selling intensified market sentiment.
• 00:09: Ethereum ETF data shows a net inflow of about 18,300 ETH (approximately $57.09 million) that day, reflecting that some institutional funds remain active, but failed to offset the downward pressure.
• 00:10: The ecosystem welcomed the Fusaka upgrade and several network improvement announcements, including EIP implementation, new applications going live, and major conferences being held, but the positive news did not reverse the price decline in the short term.
• 00:58: On-chain data indicates that due to the market decline, some high-leverage ETH long positions were forcibly liquidated, exacerbating market sell-offs and liquidity risks.
• 01:10: ETH price slightly rebounds to around $3015.41, showing signs of brief stabilization after the sharp fluctuations, but overall market sentiment remains low.

Cause Analysis 🔍

The sharp decline in this market is primarily attributed to two key factors:

1. Increased Macroeconomic and Policy Uncertainty

• Recent U.S. economic data (such as the PCE price index and core PCE) shows mild changes, but uncertainties regarding the Federal Reserve's monetary policy direction, the end of quantitative tightening, and potential future interest rate cuts have led to doubts about the overall economic policy direction in the market.
• Additionally, regulatory and policy dynamics in multiple countries, especially the judicial crackdown on the crypto market and the progress of related cases, have made investors more sensitive to macroeconomic and legal policy risks.

1. Liquidation of Leveraged Funds and Institutional Liquidity Risks

• The presence of a large number of high-leverage trades in the market has triggered a chain liquidation effect during price fluctuations. Multiple large long positions were forcibly liquidated, intensifying panic selling, and funds rapidly exited the market, driving prices down sharply.
• In the data of large transactions and liquidations, it can be seen that the total liquidation amount across the network reached $10 million in nearly one hour, with long positions accounting for 84%, and a net outflow of nearly $90 million from major players, indicating the fragility of internal fund liquidity.

Technical Analysis 📊

Based on Binance USDT perpetual 45-minute candlestick data, the technical analysis of ETH/USDT is as follows:

• Indicator Performance
• The RSI indicator has fallen below 30, entering the oversold zone, suggesting that the market may experience a short-term rebound.
• The KDJ has formed a death cross and the indicators are converging, indicating that short-term downward pressure remains significant.
• The OBV has fallen below previous lows, indicating that selling pressure is dominant.
• Volume Observation
• Trading volume surged by 163.75%, far exceeding historical averages, indicating significant activity during panic selling.
• The 10-day and 20-day average volumes have significantly increased, showing a sharp rise in market trading activity and abnormal fund flow.
• Moving Average Status
• The price is currently below the MA5, MA10, MA20, MA50, and EMA series moving averages, and this bearish arrangement of multiple moving averages confirms the overall downward trend.
• The candlestick chart shows patterns resembling a belt hold line and three external reversal patterns, but overall, the imbalance in volume has not yet formed an effective reversal signal.

Market Outlook 🔮

The current market is in a phase of intense oscillation between risk and rebound:

• Bearish Pressure Remains
  Macroeconomic data, policy uncertainty, and the effects of high-leverage liquidations still pose downside risks. If the market continues to lack clear policy benefits and liquidity relief measures, further declines may still be anticipated.
• Oversold Zone May Foster Rebound Opportunities
  The RSI being in the oversold range may stimulate some short-term buying. For long-term value investors, if the fundamentals are not fundamentally impacted, the current decline may provide a window for buying on dips.
• Technical Support to Watch
  Investors need to closely monitor candlestick patterns and changes in trading volume to see if the market can achieve a rebound at key support levels (such as near recent lows), while also observing the inflow of institutional funds and signs of leveraged position recovery.
• Prudent Operation Suggestions
  In a highly volatile market, it is recommended that traders reduce their positions, control risks, and pay attention to liquidity dynamics. For short-term operations, it is advisable to set strict take-profit and stop-loss levels; for long-term positioning, patience is required to wait for clearer market sentiment and improved risk sentiment before participating.

Overall, although the recent sharp drop in ETH has triggered panic, the oversold state also contains certain rebound potential. Market participants should examine market changes from both macro and micro perspectives, implement risk control and position management, and operate prudently to respond to potential trend reversals in the future.

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