Behind the collapse of ETH: Value reconstruction and market reflections in the storm

Vitalik 2026-2-4 08:15 77186人围观 ETH

The currency circle in early 2026 is destined to be recorded in the history of volatility. Following the sharp fall of Bitcoin from a high of US$97,000, Ethereum (ETH), as the core pillar of the crypto ecosystem, staged a shocking jump in just 24 hours fr

The currency circle in early 2026 is destined to be recorded in the history of volatility. Following the sharp fall of Bitcoin from a high of $97,000, Ethereum (ETH), as the core pillar of the crypto ecosystem, staged a shocking jump in just 24 hours from January 31 to February 1 - the price once plummeted by more than 11%, reaching as low as $2,256, a drop of nearly 54% from the historical high of $4,900 in August 2025. More than 420,000 investors were forced to liquidate their positions, with the entire contract liquidation amount reaching US$2.561 billion. Among them, the largest single ETH liquidation order was worth US$222 million. A storm of evaporating wealth swept across the entire market. This plunge is no accident, but the inevitable result of the interweaving of multiple factors such as macro policies, market risks and industry difficulties. It also reflects the deep reconstruction of the value logic of crypto assets.

Plunge Panorama: Market Panic Behind the Data

The impact of this ETH plunge can be seen from a set of core data. The timeline clearly records the evolution of this shock: starting from 09:30 on January 31, the price of ETH began to fluctuate violently from the opening price of $2,807, and fell sharply from $2,799 to $2,673 in just 11 minutes, a drop of nearly 4.8%. ； As of 10 a.m. on February 1, the price remained at around $2,459, with the decline narrowing to 9%, but market sentiment was still extremely depressed.

The financial loss is even more severe. Within 24 hours, the number of cryptocurrency liquidations across the entire network exceeded 420,000, and more than 90% of them were long-term investors who were bullish on ETH. The centralized liquidation of leveraged funds formed a vicious cycle of "fall - liquidation - then fall again". Data on the chain shows that institutional whales, including "Big Brother Maji", have experienced forced liquidation. The liquidation amount of a single individual has reached a maximum of 5.14 million US dollars, and the liquidation amount of the largest single ETH-USD contract has soared to 222 million US dollars, equivalent to 1.5 billion yuan, causing holders to lose all their money overnight. At the same time, the withdrawal of main funds accelerated. In just one hour, the main net outflow of ETH reached US$10 million. The ETF market also showed a capital outflow, further exacerbating the market's liquidity crisis.

Technical warning signs have already been issued. The current price of ETH is running along the lower track of the Bollinger Bands. MA5, MA10, MA20 and other moving averages are arranged in a short position. The price is fully below the moving averages, showing strong downward pressure. ； The KDJ indicator continues to diverge, and the RSI indicator enters the oversold zone. Although there may be room for a slight rebound in the short term, the overall trend is still weak. The trading volume data is even more bizarre: the recent trading volume has dropped by 43.41%, showing that market activity has dropped significantly, while the 20-day moving average of trading volume has increased by 23.63%, reflecting the false prosperity of mid-term trading activity, and the emotional game between the long and short parties has fallen into a weak state.

Triple triggers: Resonant downward trend of macro, market and industry

The collapse of ETH was not driven by a single factor, but was the result of three "headwinds" intertwined with macro policy turbulence, the market's own hidden dangers, and industry competition pressure. Each factor became an important straw that crushed market confidence.

Macro policy: risk aversion triggered by uncertainty

The concentrated release of the macroeconomic "pressure cooker" effect was the direct trigger of this plunge. U.S. President Trump’s recent series of executive measures, tariff threats, and national emergency declarations have heightened market concerns about the global economic outlook. ； The expectation that the Federal Reserve will keep interest rates unchanged and change its chairmanship has further confused the market about the future direction of monetary policy. On the evening of January 30, Beijing time, Trump officially nominated Kevin Warsh as the next chairman of the Federal Reserve. This figure is generally considered to be more "hawkish" than Powell. He has publicly criticized private cryptocurrency projects as "fraudulent" and "worthless." Once the news of his nomination was announced, it immediately triggered market panic.

Under the dual influence of high interest rate expectations and policy uncertainty, the risk appetite of funds has dropped sharply. Investors have withdrawn from high-risk assets such as cryptocurrencies and instead invested in traditional safe-haven assets such as U.S. Treasury bonds and gold. It is worth noting that the price of gold recently exceeded 5,000 US dollars per ounce for the first time, an increase of more than 18%. However, the correlation between Bitcoin and ETH, known as "digital gold", has dropped to a historical low, failing to attract any safe-haven capital inflows, and instead becoming the hardest hit area of capital selling. In addition, the tightening of global regulatory policies has further intensified market pressure. The new crypto asset capital regulations implemented in Hong Kong set the risk weight of unsecured crypto assets such as ETH at 1250%, significantly raising the threshold for banks to participate in crypto business. The U.S. Senate’s proposed Virtual Asset Market Structure Act limits stablecoin earnings. These policies have further shrunk market liquidity.

Market hidden dangers: a vicious cycle of high leverage and liquidity depletion

The long-term accumulated market risks have completely exploded under the impact of macro policies. The first thing to bear the brunt is the excessive leverage ratio. Currently, the amount of open ETH contracts on multiple encryption platforms is as high as 7.8 billion U.S. dollars. A large number of investors are betting on the rise of ETH by borrowing money and adding leverage. This ultra-high leverage position environment will trigger centralized liquidation if the price pulls back slightly. On-chain data shows that during this plunge, a large number of highly leveraged long orders were forced to be liquidated, and liquidation events occurred frequently. The chain triggering of programmed trading and stop-loss strategies further amplified the price decline, forming a vicious cycle.

The depletion of liquidity becomes the "amplifier" of market fluctuations. The trading activity in the cryptocurrency market has continued to decline recently, and the depth of the Bitcoin spot trading order book has dropped significantly compared with November last year. The depth of the order book within the 2% range of the central price is only 20-25 million US dollars. In the context of insufficient liquidity, a large sell order was enough to trigger significant price fluctuations. After market panic spread, investors' concentrated selling further aggravated the liquidity crisis, causing ETH prices to fall out of control. At the same time, the withdrawal of institutional funds has caused the market to lose important support. In late January, the net outflow of Bitcoin ETF in a single week exceeded US$1.2 billion, and the capital inflow of ETH ETF was also far less than expected. Compared with the net inflow of Bitcoin ETF of US$21.8 billion, the net inflow of ETH ETF was only US$9.8 billion, highlighting the "tactical wait-and-see" attitude of institutions towards ETH.

Industry Dilemma: The Deep Paradox of the Divergence between Fundamentals and Prices

What is more alarming than the short-term plunge is the industry dilemma faced by Ethereum itself - the fundamentals of technological upgrades and ecological prosperity form a strange departure from the continued falling prices. In 2025, Ethereum successfully implemented two milestone upgrades of Pectra and Fusaka. The Layer 2 ecosystem has experienced explosive growth. The annual revenue of the Base chain has exceeded that of many public chains. The US$2 billion BUIDL fund of giants such as BlackRock also mainly runs on Ethereum. Its dominance in the field of RWA (real world assets) has not been shaken, and the number of active developers still ranks first in the world.

However, the benefits of technological upgrades have turned into price killers in the short term. The Dencun upgrade in March 2024 introduced EIP-4844, which significantly reduced L2 transaction costs, but also led to an oversupply of Blob space. Blob fees were close to zero for a long time, causing the burning volume of ETH to plummet. The "ultrasonic currency" deflation narrative that originally relied on the EIP-1559 mechanism completely collapsed. ETH returned from deflation to inflation, and the daily net supply continued to grow. This caused a large number of investors who invested in ETH based on deflationary logic to choose to leave. What is even more embarrassing is that Ethereum has fallen into the paradox of "the more successful L2 is, the weaker the mainnet value capture": the prosperity of Layer 2 ecology diverts L1's income, and the improvement of user experience actually damages the income of ETH holders.

The deterioration of the competitive landscape further intensified the pressure on Ethereum. With the advantages of high TPS and low rates, Solana has seized market share in PayFi and DePIN tracks. The number of active developers has increased by 83% year-on-year, attracting a large number of new developers. ； Leading projects such as Render Network and Helium have migrated from Ethereum to Solana, resulting in a continuous diversion of user and developer resources. Although Ethereum still dominates the RWA and stablecoin markets, its competitiveness has declined significantly in the consumer-facing application layer.

After the crash: Revaluation beyond panic

In the face of the continued plunge, market panic is spreading, but we still need to look rationally at the reconstruction of the value logic behind this shock. In the short term, ETH price will still face the triple pressure of macro policy uncertainty, the aftermath of leverage liquidation and depressed market sentiment. If it cannot hold the key support level, it may drop further. However, the RSI indicator is in the oversold zone, which also indicates the possibility of a short-term rebound. For ordinary investors, the current core strategy is to control positions, stay away from high leverage, and set stop losses in a timely manner to avoid being swayed by market fluctuations. At the same time, pay close attention to macro policy trends and on-chain capital flows, and wait for market sentiment to stabilize before considering layout.

In the long term, the core value of Ethereum has not disappeared due to the short-term plunge. Its huge developer community, complete ecological infrastructure, and absolute dominance in the RWA and institutional finance fields are still the core competitiveness that other public chains cannot shake. In the future, with the ice-breaking of pledged ETFs, the explosive growth of RWA assets, and the reversal of supply and demand in the Blob market, Ethereum is expected to regain value support: after the ETF with pledge function is approved, ETH will become an asset with both technological growth and fixed income, attracting long-term capital inflows such as global pensions and sovereign wealth funds. ； Trillions of dollars of RWA assets on the chain will lock a massive amount of ETH and reduce market circulation ； The birth of L2 hot-selling applications will fill up the Blob space and push ETH back into a deflationary state.

This ETH plunge is essentially a pain in the process of the encryption market's transformation from barbaric growth to mature regulation. It is the market's concentrated feedback on the macro environment, industry competition and its own problems. For the entire crypto industry, the plunge is not the end, but an opportunity to re-anchor value - without the support of false narratives, only projects with real technical strength and ecological resilience can survive the fluctuations. For investors, only by abandoning the speculative mentality, rationally understanding the risk attributes of crypto assets, and focusing on the long-term value of the project can they maintain wealth in this storm and seize the future development opportunities of the industry.