The crypto market has been hit in the past week. Total capital fell below $ 1 trillion for the first time since January 2021, losing an astonishing $ 300 billion in just seven days.
One of the worst performing cryptocurrencies was ETH. It has fallen 40% over the same period and is trading at around $ 1,000, temporarily below this level.
Without further effort, here are three possible reasons for the decline in ETH over the past week.
Broader market pullback
In general, looking at the crypto market, it’s clear that the whole thing has plummeted in the last few weeks. This decline accelerated last week, and as mentioned earlier, $ 300 billion was wiped out of total capital.
But it’s not just about cryptography. Wall Street is also in turmoil, with the S & P 500 trading at a loss of 4.25% last week. The Dow Jones Industrial Average (DJIA) also fell 4% over the same period, but the Nasdaq Composite Index fell just under 2%.
The global economy is plagued by rampant inflation, ongoing wars in Ukraine, and the wider macroeconomic situation is not good. Just this week, the Federal Reserve announced yet another rate hike – this time at 75 bps – the highest rise in 28 years. The National Bureau of Labor Statistics has also released consumer price index (CPI) figures. This is an indicator used to measure inflation (although many claim that actual inflation is higher).
Cryptocurrencies are a risky asset, so it’s no wonder investors dispose of them first, causing pain to the entire market.
ETH is not immune. For comparison, the following heatmap shows that all major cryptocurrencies have been in the red in the last 7 days.
Still, it’s clear that ETH is showing the worst performance. This has to do with two other potential reasons.
Suffering Celsius Network
It’s important to note that almost everything related to what’s happening on the Celsius Network is from industry analysts. There is no official information about the company’s current situation. The first signs of great distress occurred when the platform completely stopped all withdrawals, transfers, and swaps due to extreme market conditions. This basically made the user inaccessible to the funds and left them locked out.
Although the Celsius Network is centralized, it is also one of the largest participants in the DeFi market. CryptoPotato We explained what is currently known and why this can be a significant risk to the general cryptocurrency industry.
In short, Celsius is a lending platform that allows users to deposit crypto and earn yields on it. In turn, they will spend money to generate higher yields by whatever means they deem appropriate. But as it may have turned out, especially when it comes to risk management, it revealed that one of their public addresses is less than 4% away from being liquidated in a chain of just under $ 500 million. Not scrutinized. Since then, this position has been further secured and appears to be safe.
However, the Celsius Network is also suspected to be a large owner of stETH, the ETH bet on Lido’s platform. stETH is currently trading at a 4% discount on ETH, which, coupled with the massive withdrawal demand, may have helped to boost the massive sales pressure ETH has seen in the past week. Also, just as rumors about Celsius began to rampant, cryptocurrencies began to decline much more seriously than in other markets.
Three Arrows Capital (3AC) Probably bankruptcy
As if the above weren’t enough, Three Arrows Capital, one of the largest crypto hedge funds with huge amounts of assets under management (AUM), has also gone through a rough patch, to say the least. increase.
A few days ago, rumors began to spread that the fund was facing a major liquidation and was probably bankrupt. Zhu Su, one of the fund’s co-founders, confirmed somewhat mysteriously that:
We are in the process of communicating with stakeholders and are working hard to resolve this.
Yesterday, another co-founder, Kyle Davis, said the company is exploring a variety of options, including selling assets and bailouts by another company.
3AC probably has a lot of ETH. According to reports, the company has repaid existing loans and liquidated millions of ETHs in the past few days alone to prevent further liquidation.
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