A string of recent high-profile losses rattled market confidence in Ethereum [ETH]… right as available supply fell. This is a recipe for chaos, and could lead to chaotic price moves for the token.
Here’s the rundown.
A $750M bet gone wrong
Trend Research, led by Jack Yi, built one of the largest leveraged Ethereum positions in the market. That was a $2.6 billion ETH long constructed using loans from Aave [AAVE]. The trade was a big bet on ETH’s upside, made bigger through leverage.
That bet has now been fully unwound.
On-chain data showed Trend Research sold its entire ETH position this month, raising $1.74 billion to repay outstanding loans. The subsequent result was a realized loss of roughly $750 million.
The fund’s wallets now hold just over $10,000 in total assets, including $10,000 USD Coin [USDC] and negligible ETH exposure.
But here’s where it gets interesting…
None of this happened in a liquid market.
Ethereum’s exchange-held supply has fallen back to levels last seen in mid-2016. According to CryptoQuant data, total ETH reserves across all exchanges are at roughly 16 million ETH. This matches the same spot supply seen during Ethereum’s first full year of trading.
At the time, ETH was barely established. Today, it is a multi-trillion-dollar ecosystem.
The contrast with Bitcoin [BTC] is interesting. While BTC exchange balances have rebounded to around 2019 levels, Ethereum moved in the opposite direction. OTC balances have risen somewhat, but they’re still small in comparison to exchange supply.
If exchange liquidity continues to thin (while large players unwind), price discovery could become unstable.
Even so, not everyone is stepping away. Despite it all, Tom Lee-backed Bitmine added 20,000 ETH worth $41.98 million on the 8th of February. Separately, the Infini exploiter also bought the dip, spending 13.32 million DAI to acquire 6,316 ETH at $2,109. This was before routing funds through Tornado Cash.
ETH weakness during low liquidity
Ethereum traded at $2,077 at press time. The token was down from recent highs near $3,300, a fall of roughly 37%. The daily RSI was at 31.22.
Trend strength was still elevated, with the ADX at 50.01. Bearish pressure dominated as –DI (35.77) stayed well above +DI (6.78).
Selling volume has expanded during the decline, with daily volume near 39.7K ETH.
Final Thoughts
- Ethereum falls with exchange balances at 16 million ETH.
- Even modest flows could move price aggressively.
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