Ethereum (ETH) Market Cap Drops Over $124 Billion in Six Weeks
Ethereum, the second largest cryptocurrency by market capitalization, is currently in free fall. More than $124 billion in capital disappeared from the Ethereum (ETH) decentralized finance (DeFi) in six weeks.
Seven months ago, ETH hit its all-time high at $4,891.70 on November 16, 2021. But it now trades at around $1,100, which is less than 75.2% of its all-time high.
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The beginning of 2022 was unstable for the cryptocurrency market, especially ETH, but in recent weeks it has become much more complicated. However, the larger crypto market continues to decline amid macroeconomic uncertainty fueled by an unstable stock market, interest rate hikes and fears of a crisis.
The Ethereum DeFi market is drastically declining
Glassnode, a blockchain analytics company, released a report on June 17. The report was titled “The Great DeFi Deleveraging”. The report stated that more than $124 billion in the capital had been pumped out of the Ethereum DeFi market in just six weeks. As a result, the market value decreases rapidly.
According to their statement, many reasons have led to a wide range of margin calls, liquidations and deleveraging. These reasons include the global tightening of monetary policy, the growing strength of the US dollar and the declining value of risky assets.
Their analysis looks for some early warning signs that predict a decline in ETH use and community demand after ETH’s record high in November 2021.
They claimed that on-chain activity and Ethereum gas prices had fallen in six months. This indicates a decline in overall Ethereum network activity.
ETH is currently trading below $1,100 on the daily chart | ETH/USD chart of Tradingview.com
As stated in the report:
Across many facets of the Ethereum ecosystem, the demand profile has declined, with overall application usage declining and network congestion easing after the November 2021 ATH, and a cooling of NFT markets has become apparent in recent weeks.
TVL on Ethereum Down 60%
According to the report, Ethereum’s TVL (Total Value of All Ether) has fallen by 60% in six weeks. The decline took place in two phases. In May, the Terraforms Lab project collapsed, causing a $94 billion loss. And in June, the ETH fell below $1,000, resulting in a $30 billion loss.
According to the report, there have been only two major deleveraging events:
The first is -46.0% associated with the recent collapse of LUNA and -37.5% during the then ATH sell-off in May 2021.
The combined market valuation of the top four stablecoins USDT, USDC, BUSD and DAI has now surpassed the market valuation of ETH by $3.0 billion.
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Glassnode stated that the deleveraging event that is taking place is painful and akin to a mini-financial crisis. However, they added that while this is difficult, it presents an opportunity to eliminate excess leverage and rebuild in a healthy way.
Featured image from Flickr and chart from TradingView.com