The fear gripping the crypto market is taking a toll on Ethereum.
Over the past week, Ether is down more than 13%, according to CoinGecko. It remains below its key level of $2,000, currently trading at around $1,774, and Ether futures saw $237 million in liquidations over the last day, as CoinDesk first reported, citing Coinglass data. That’s nearly twice the amount traders lost on Bitcoin-tracked futures.
There are several likely culprits.
As Ethereum readies for its highly anticipated “merge” upgrade, where its network will shift from proof of work to proof of stake, developers noticed a potential security risk on Wednesday: That day, Ethereum’s crucial Beacon chain, or proof-of-stake chain, experienced a “reorg” issue, meaning that the Beacon chain appeared to have briefly split in two and transactions were being processed on the split version of it.
“Client teams have been scrambling to understand the situation so they can figure out what to fix for the last couple of hours!” Ethereum cofounder Vitalik Buterin tweeted on May 25.
Things appeared to be back under control by Friday. Ethereum developers say they’ll share details of what happened publicly once they have a “high degree of confidence regarding the root cause.” But Ether’s price has since suffered, down 7% in 24 hours alone.
Additionally, Ethereum has also seen a decline in demand and user activity on its network in the past few months, which could be adding to the downtrend.
“Ethereum’s transaction volume is one-fifth of what it was a year ago,” down 80%, Lucas Outumuro wrote in Friday’s IntoTheBlock newsletter. “Decreasing NFT interest along with lower yields in DeFi have led to volumes dropping significantly. Other key metrics like fees and daily active addresses follow the same path.”
This is “in sync with the last bear market,” he wrote, “where on-chain activity decreased across the board. However, this has not stopped long-term believers to continue accumulating.”
Alongside Ethereum, the greater cryptocurrency market is down 3% in the past 24 hours. Bitcoin is currently trading at $28,878, struggling to hold $30,000. Altcoins like Cardano, Solana, and Avalanche are down 14%, 19%, and 25% in the past week, respectively.
