Article source: currency market trader

Under the dual pressure of the continued escalation of the tariff war and the intensification of economic recession risks, the crypto market has started a new round of panic selling losses, and the risk of on-chain pledges of ETH chain has once again become a hot topic in the market. Since the potential liquidation scale of the price range of 1760-1660 is as high as 320,000 ETH, arbitrage bears have begun to frequently launch targeted sniping at giant whales in this area, trying to activate the chain liquidation mechanism. However, it is interesting that whenever the currency price falls to the liquidation price, the two giant whales with pledge scales of 64,800 ETH and 60,800 ETH respectively can always add margin in time at critical moments to resolve the liquidity crisis. This high-intensity offensive and defensive tug-of-war also caused the long and short ETH prices to fluctuate violently around 1760.

Since March 24, although ETH prices have continued to fall, put options positions across the network have increased by 23% against the trend. The core logic of the bears not choosing to take profits and continue to increase their positions is: referring to the historical path of ETH falling from US$4,860 to US$882 (down about 80%) in the previous bear market, if calculated based on the same proportion, the bottom of this bear market theory will point to the US$820 water level. This means that the current price pullback only completes 60% of the theoretical decline, and most trend short sellers determine that the market is still in the mid-term of the bear market.

So, will ETH really fall to $820? The author believes that it is unlikely. The main reasons are as follows: 1. According to data from IntoTheBlock and Glassnode, although Ethereum fell 78% from its high on June 13, 2022, more than half of the addresses were still profitable at that time, and the profit share of long-term holders (investors who hold coins for more than one year) was still as high as 64%. Although the ETH price on March 11, 2025 was 103% higher than on June 13, 2022, Ethereum's profit address accounted for only 47% at this time, and the profit share of long-term holders was only 34%. This abnormal divergence shows that after full turnover from 2020 to 2024, the average holding cost of the ETH market has significantly increased to US$2,058 (Glassnode, March 2025). Most investors are currently in a state of floating losses, and the strengthening of the psychological reluctance to sell has led to a marginal decline in selling pressure.

2. The Federal Reserve implemented extraordinary currency tightening from 2022 to 2023, and quickly raised the benchmark interest rate from 0% to 5.25% in just 12 months, triggering a sharp contraction of global liquidity and causing a rapid collapse of the crypto market. However, 20The trend of marginal improvement in liquidity in 25 years has gradually become clear: on the one hand, the Federal Reserve has begun to plan to reduce the scale of quantitative tightening (implemented as early as April); on the other hand, CME interest rate futures show that the market generally expects to launch 2-3 interest rate cuts in 2025, and the downward trend in real interest rates is expected to promote the recovery of risky assets valuations.

Of course, limited room for decline does not mean that the market will rebound immediately. Because this round of ETH decline almost destroyed the live power of the bulls in the market. According to data from on-chain analyst Murphy, ETH's two rounds of large-scale buying were concentrated in the range of $3200-3500 and $2600-2800 respectively. When the price of the currency fell below $2,300, the longs' ability to replenish positions was significantly weakened, and some addresses had even begun to cut their losses; and when the price of the currency fell below $2,000, these addresses had almost no replenishment actions.

There is no doubt that the sluggish on-chain activity is highly consistent with the difficulties encountered by the secondary market. On February 3, ETH fell rapidly from 3082 to 2090, with a single-day decline of 32%, causing the market's approximately US$6.8 billion ETH leverage to be liquidated (contract 5 billion + 1.8 billion on-chain), which is almost the most tragic long disaster in the history of crypto. In a sense, ETH has entered a new accumulation period. New funds entering the market will not immediately rescue the heavy historical trapped market, but will continue to wash the market at the bottom and absorb cheap chips. For traders, the current operating strategy should be to build positions in batches when the price is low and appropriately increase the frequency of swing trading.

On April 1, Binance's adjustment to the ratio of holdings of multiple altcoins to the leverage margin unexpectedly triggered the crisis in the MEME currency market: ACT, TST, HIPPO, DEXE, PNUT and other tokens experienced collective flash crashes after the new regulations came into effect. Although the market generally accuses the platform of hasty response mechanisms and forced operation, the liquidity dilemma of MEME coins is essentially a structural contradiction in the industry. Coinmarketcap data shows that of the 16,200 crypto tokens currently included, 99.8% of the currencies have an average daily trading volume of less than US$50 million. Coinbase CEO Brian Armstrong disclosed that there are still more than 1 million new tokens pouring in the current market every week. The shrinking liquidity combined with wholesale supply is accelerating the process of revaluation of the altcoin sector. For example, the VC currency FDV launched by Binance in March generally dropped to US$300 million to US$500 million, while the valuation of MEME currency was mostly maintained at the level of US$20 million to US$30 million, with a valuation drop of 60% to 70% compared with 2024.

From past experience, when the entry threshold is graduallyWhen elimination (Amamao and Dog are issued without barriers) and the continuous expansion of the supply of target assets form a dual pressure, capital will inevitably show a head aggregation effect - high-quality projects not only harvest market liquidity, but also form a structural valuation premium. Although the first stage of valuation adjustment caused by the industry's cyclical fluctuations is always indiscriminately squeezed bubbles, the certainty premium of leading projects will gradually emerge in the second stage.