Where’s the bottom?
That’s the vital question investors are asking with ETH down almost 18% in the last 30 days, and with other major Ethereum-based DeFi tokens nosediving as much as 57% in the same time span.
The one bright spot is that this week hasn’t been quite as brutal as the horrorshow from May 16 to May 23. ETH’s price cratered 45.6% to $2,109 during that span. In contrast, this week’s 28.1% swoon for Ether doesn’t look so bad. Moreover, the current performance shows some clear deviations compared to that weeklong drawdown in May.
For starters, liquidations across centralized and decentralized platforms haven’t been as proportionally severe. With ETH dropping nearly half as much in the last week as it did between May 16 to May 23, you’d think a similar amount of liquidations would occur. But that hasn’t been the case.
This week’s high of daily liquidations on centralized exchanges was only $1.01B, compared with a $7.56B day on May 18, according to Bybt. This would indicate that the market had develeraged before this week’s drop.
“Most apes died in May,” economist Alex Kruger quipped on Twitter.
The relative difference between May 18 liquidations and June 21 liquidations on decentralized platforms was even more profound. The June liquidation high was only 4.1% of the high in May, despite the contrast in price drop being over 50%. The takeaway again should be that the market has deleveraged.
In another contrast with May, USDC, one of the most popular stablecoins in DeFi, has seen its supply parked in smart contracts drop. During the May sell-off, users kept their USDC in smart contracts. During this week’s drawdown however, USDC in smart contracts is dropping along with DeFi’s other primary stablecoin, DAI.
It’s unclear why USDC and DAI were out of sync in May., other than the sense that investors were better prepared for this week’s selloff.
In any event, ETH’s net unrealized profit/loss ratio has probably entered what analytics provider Glassnode calls the “optimism — anxiety” range for the first time since late November 2020.
NUPL is the difference between unrealized profit and loss positions, which are achieved by contrasting ETH’s price when it moves wallets and its current price. For example if a user sent Ethereum to a friend when the price was $3,000, and now the price is $2,000, the friend would have a net unrealized loss of $1,000.
As the old saying goes, history doesn’t repeat itself, it rhymes. Ethereum and crypto endured a multi-year bear market starting in early 2018, which has people anticipating a similar pattern starting in mid 2021.
However, Palis, as they go by on Twitter, muses “there’s no way ETH goes into a multi-year bear. Imo if it does then crypto is p much dead, and there’s no way.”
Still, history may rhyme enough — after a brutal month-long stretch starting in mid-Jan. 2018 which saw ETH lose roughly 50% of its value, the asset would trend downward for the entire year ending up down over 90% in Dec. 2018.
ETH bulls certainly hope, if a crypto winter is upon us, that it isn’t as cold, or as long, as the last one.