Key Points
The price of Ether (ETH) has seen an 8% drop on March 19, a dip that coincides with a decrease in activity on the Ethereum network.
Since reaching $4,000 for the first time since 2021 on March 8, the second-largest cryptocurrency by market capitalization has been on a downward trend.
Reasons for Ethereum’s Price Dip
The decline in Ether’s price has triggered a wave of liquidations across the derivatives market.
Bullish traders were taken by surprise, resulting in a rapid series of long liquidations.
Over the past 24 hours, more than $110.6 million in Ether long positions have been liquidated, with $77 million being eliminated in the previous 12 hours.
With such a large volume of long liquidations, traders are now watching the $3,100 price level closely.
If Ether’s price reaches that level, $212 million of leveraged long positions could be at risk for liquidation.
Ether’s price is negatively impacted when long derivative positions are liquidated without the support of trading volume.
Simultaneously, the price drop of Ether coincided with a decrease in the volume of the Ethereum network.
Ethereum’s volume has dropped 6.15% for the week of March 19, following the highly anticipated Decun upgrade on March 15.
Alongside the volume decrease, the total value locked (TVL) in the Ethereum network dropped 8.5% in 24 hours on March 19.
The current Ether TVL of $47.9 billion is over $60 billion less than the all-time high, which was set on Nov. 8, 2021.
This significant decrease in volume comes as Solana (SOL) gains momentum amid the memecoin craze.
Market analysts are expressing pessimistic views regarding Ether’s short and medium-term price performance.
Both the crowd and smart money cohorts are showing bearish sentiments towards Ether’s price.
The downturn in sentiment comes as large capital groups are signaling that a spot Ether ETF is less likely to be approved.
Despite this, Fidelity filed an amendment to their spot Ether ETF application on March 18.
Investors’ appetite for high-risk assets and their interest in DeFi could continue to diminish if macro events, the emergence of new blockchains, and a reduction in volume hinder growth.
The eventual increase in Ethereum network-based protocols and the potential of a spot Ether ETF may prove to be a long-term catalyst for price growth.
