Ethereum (ETH) Market Cap Falls More Than $124 Billion In Six Weeks
22 June 2022 - 08:00PM
NEWSBTC
Ethereum, the second-largest cryptocurrency by market
capitalization, is currently in freefall. Over $124 billion in
capital vanished from the Ethereum (ETH) decentralized finance
(DeFi) in six weeks. Seven months ago, ETH reached its highest
value ever at $4,891.70 on November 16, 2021. But it is now trading
at around $1,100, which is less than 75.2% of its all-time high
value. Related Reading | Controlling The Chaos: FTX Exchange
Bails Out BlockFi With $250M The start of 2022 was unstable for the
cryptocurrency market, particularly ETH, but in previous weeks,
things have become much more complicated. However, the larger
crypto market continues to fall due to macroeconomic uncertainty
fueled by an unstable stock market, interest rate hikes, and the
fear of crisis. The Ethereum DeFi Market Is Deleveraging
Dramatically Glassnode, a blockchain analytics firm, released a
report on June 17. The report was titled “The Great DeFi
Deleveraging.” The report stated that over $124 billion in the
capital had been drained out in only six weeks from the Ethereum
DeFi market. As a result, its market value is deleveraging rapidly.
According to their statement, many reasons have sparked a wide
range of margin calls, liquidations, and deleveraging. These
reasons include worldwide monetary policy tightening, the growing
strength of the US dollar, and decreasing values of risk assets.
Their analysis looks at some early warning signs that predict a
drop in ETH usage and community demand after the November 2021
all-time high of ETH value. They claimed that on-chain activity and
Ethereum gas prices had decreased over six months. This indicates a
drop in overall Ethereum network activity. As stated in the
report: Across many facets of the Ethereum ecosystem, the demand
profile has been waning, with general application usage in decline,
and network congestion easing after the Nov 2021 ATH, and a cooling
off of NFT markets becoming evident in recent weeks. TVL on
Ethereum Dropped By 60% According to the report, Ethereum’s TVL
(Total Value of All Ether) dropped by 60% in six weeks. The decline
occurred in two stages. In May, the Terraforms Lab’s project
collapsed and caused a $94 billion loss. And in June, ETH fell
below $1,000, resulting in a $30 billion loss. By the report, there
have only been two higher magnitude deleveraging events: The
first being -46.0% associated with the recent LUNA collapse and
-37.5% during the sell-off from the then-ATH set in May 2021. The
combined market valuation of the top four stablecoins USDT, USDC,
BUSD, and DAI has now exceeded the market valuation of ETH by $3.0
billion. Related Reading | Why The Inventor Of
Ethereum Attacked This Bitcoin Pricing Model Glassnode stated that
the deleveraging event taking place is painful and is similar to a
mini-financial crisis. However, they added that although this is
difficult, it provides an opportunity to eliminate excess leverage
and rebuild healthily. Featured image from Flickr and chart
from TradingView.com
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