20% Freefall in Two Days Amid $1B Liquidation Cascade

The ether of Ethereum ETH$3,495.36 has fallen just over 20% since Tuesday in a two-day rout that looks almost like the Oct. 10 crash.

Trading just below $4,000 on Monday, the second-largest cryptocurrency by market cap fell to nearly $3,000 by Tuesday afternoon, US time, hitting its weakest level since mid-July. It’s the second severe correction in a month, as the October 10th flash crash took ETH to $3,440 from just shy of $4,500 a day earlier, a 25% plunge.

ETH was recently trading just above $3,200 after a modest rebound, still down 9.4% in the last 24 hours.

The sharp drop resulted in more than $970 million in liquidations in leveraged ETH derivatives markets, according to CoinGlass data. Most of these positions were long—traders betting on higher prices—were wiped out as ETH cut into support zones one after the other.

Markus Thielen, founder of 10x Research, warned in a note on Tuesday that ETH’s breakout leaves little support underneath and more room to fall.

BitMine, the largest ETH holding company that has steadily acquired assets in recent months, appears to have been leveraged with limited supply capacity for ETH, Thielen said.

BitMine has accumulated nearly 3.4 million ETH, Thielen estimated the company’s cost basis at about $3,909, meaning the firm is sitting on about $2 billion in unrealized losses.

“While there is no immediate liquidation risk, the real concern is who will be the next incremental buyer of ETH now that BitMine appears to have exhausted its firepower,” Thielend said.

Demand for ETFs has also taken off. Inflows reached $9.5 billion in July and August as BitMine ramped up purchases, but have since dried up, Thielen noted. Only $850 million has been cleared from ETH ETFs since the October crash, leaving room for more selling as many ETF investors are now below current price levels.

Retail interest has also collapsed, Thielen said. Google search trends, a rough proxy for retail demand, for Ethereum are down 13% from their peak.

With all the catalysts that fueled ETH’s rally to nearly $5,000 in August gone, Thielen sees the $2,700-$2,800 range as the next likely landing zone.

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