Beginning on Thursday, crypto markets experienced a massive sell-off which affected most coins and brought down total market capitalization of cryptocurrencies to $200 billion, down $25 billion in the space of a few hours in what was overall a bearish week for cryptocurrencies as a whole, but ethereum in particular.
Behaviour of investors indicates that the market expects ethereum to fall even further.
At the moment, of all the major cryptocurrencies, ethereum appears to be the worst hit by the selloff, after months of weak performance. At the moment, more than 300,000 short positions have opened for ethereum as investors continue to bet on its price falling even lower.
A possible reason for this is the existence of sizeable ICO selloffs. According to this school of thought, following a prolonged period of carnage in a persistent bear market that does not look set to end anytime soon, many ICOs have sold their ETH positions to make up for potential losses that may occur in the future and to fund their continued project development and operations.
It will be recalled that at the peak of the crypto market bull run, which coincided with a steep jump in popularity of ethereum-based ICOs, ETH traded at about $1,500. Since then, it has fallen more than 90 percent, causing many investors and ICO treasuries to offload their holdings in order to avoid more losses.
Another school of thought has it that the record number of short positions sparked by the general crypto market selloff is down to a decline in global equities. Thejas Naval, an analyst at Element Digital Asset Management disagrees with this notion, stating that recent price drops in the crypto market have no correlation to the stock market.
In his words:
“There’s a narrative that the crypto market was simply falling in lockstep with the equity markets, which are slowly entering into correction zones. We believe this move in cryptocurrencies had nothing to do with the stock market.”
According to Naval, there is however evidence that the price of bitcoin and global stock indexes have a little link between them. The recent mass selloff trend in the crypto market has also affected the market lodestar bitcoin, which fell as low as $6,200 following the drop it experienced on Thursday.
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