The significant fall in the crypto market triggers a chain reaction

Recently, the crypto market has experienced a sharp fall, mainly affected by global economic uncertainty, geopolitical tensions, and the weakness of tech stocks. On August 5, with significant fluctuations in traditional financial markets, the crypto market also plummeted, resulting in approximately $1 billion in liquidations across exchanges within 24 hours, with Bitcoin and Ethereum each accounting for about $350 million.

This market turmoil has triggered a series of chain reactions. According to on-chain analysis, multiple large wallet addresses were forced to liquidate their holdings of Ethereum to repay various loans. For example, one address liquidated 6,559 ETH to repay a loan of 277.9 WBTC; another address liquidated 2,965 ETH to repay a loan of 7.2 million USDT. This large-scale liquidation further exacerbated the downward trend in the market.

Data shows that the price of Ethereum plummeted from about $3,300 to below $2,200 in the past week, a decline of more than 30%. In addition to the overall bearish sentiment in the crypto market, reports of certain large institutions heavily selling off ETH have further exacerbated market fears. It has been reported that a well-known trading firm transferred 17,576 ETH worth over $46 million to a centralized exchange.

This wave of sell-off is not limited to a single institution. According to a research report, since August 3, the five major market makers have sold approximately 130,000 ETH in total. One company sold over 47,000 ETH, ranking first; another company closely followed, selling over 36,000 ETH. This large-scale sell-off further intensified the downward pressure on the market.

The market crash has led to a record high in the scale of lending liquidations on DeFi platforms this year, exceeding $320 million. Among them, the liquidation amount of ETH collateral reached $216 million, wstETH was $97 million, and wBTC was $35 million. It is worth noting that if the price of ETH continues to fall to $1950, crypto assets worth $92.2 million will face liquidation risks; if it drops to $1790, this figure will increase to $271 million.

Despite the poor performance of the market in the short term, the cryptocurrency industry still has huge potential in the long run. As a leader in application-oriented public chains, Ethereum has broad prospects in terms of technological innovation and application landing. The current market value correction also provides better entry opportunities for institutional investors.

In addition, the market generally expects that the Federal Reserve may start cutting interest rates in September. If this expectation comes true, it will help alleviate the current market pressure and may bring new capital inflows to the ETH spot ETF. Although the current performance of the ETH spot ETF is not as good as that of the Bitcoin ETF, it marks a significant progress in regulatory compliance for the encryption industry, which has far-reaching implications in the long run.

Overall, although the crypto market faces challenges in the short term, it is expected to attract more capital inflows in the future as more traditional institutions gain a deeper understanding of Ethereum's fundamentals. Market participants should pay attention to technological developments, industry trends, and real-world applications, rather than just short-term price fluctuations.