The price of Ethereum (ETH) is suffering these days.
Ethereum and the price after FTX
To be fair, the entire crypto market is suffering, but in particular it is Ethereum that is suffering due to the FTX hack.
It all stems from the funds stolen from FTX a few days ago.
The hacker took mostly ETH from the wallets of the bankrupt exchange, and in the last few days decided to sell a large portion of it in exchange for BTC.
On Sunday, the price of ETH was around $1,200, but in just two days it has fallen to below $1,100, with a low peak at $1,070 tonight.
This is about the same level touched on 10 November, which was the day FTX imploded. So in the last two days, it has lost everything it had recovered from that collapse.
It is worth pointing out that this is not the yearly low, because on 18 June the price of ETH fell even below $900, while in this month of November it has still never fallen below $1,000.
Ethereum’s price bubble
The current values are not only lower than the highs of the previous cycle, namely $1,500 touched in January 2018, but are in line with what the price of ETH had in the initial days of the great bull run of 2021.
That bull run saw four large increases in the value of the ETH price, beginning as early as July 2020 when it rose from $200 to $400.
The second big increase occurred between November and December of that year, with a rise from $400 to $600.
These two increases were only an attempt to recover previous highs, and not the beginning of the speculative bubble. The 2021 speculative bubble began to form on the price of ETH in January, when its price jumped from $600 to $1,200, and then continued to $2,000 in February and $4,600 in May.
Then, after declining in mid-2021, it touched a new all-time high near $4,900 in November.
While the 2020 increases were nothing more than a rebound from the post-bubble lows of 2018/2019, the 2021 increases turned out to be a real speculative bubble, which began in January and ended in November.
Indeed, current values are lower than those touched in January 2021, which was during the first major bull run of that speculative bubble.
Until 26 December 2020, the price of ETH was still below $700, while on 10 January it had already risen above $1,400. This was a 130% growth in just over two weeks.
The current price is right on an intermediate level between that of December 2020 and that of January 2021, which is in line with the pre-bubble price.
However, the fact that the price of ETH before the late 2020 spike was below $700 might suggest that the current level does not seem particularly reassuring.
ETH’s previous bubble
It is worth noting that the previous speculative bubble, the one in 2017, was followed by a 95% collapse in Ethereum’s price, from $1,500 on 10 January 2018 to $80 on 14 December that year.
Should something similar happen again this year, one could also expect a collapse to as low as $250, but this to date seems a decidedly distant figure.
A possible return to the $600 level of late 2020 would seem less unlikely, not least because already in June of this year the price of ETH had fallen below $900.
Should it fall to $600 it would mean a further loss of 40% from current levels, but if it were to fall as low as $250 the loss would be 75%.
Since the problems regarding the FTX hacker’s sale of ETH are only short-term problems, in the medium/long term on Ethereum weigh only macro problems due to the general trend of crypto markets.
In particular, this trend is well represented by the price of Bitcoin, which right now is not suffering from any problems related to Bitcoin itself, but only from macro problems due to either crypto or traditional markets.
However, it is worth mentioning that as of 10 November, it does not appear that the traditional markets are suffering. Instead, since the crypto world is having problems, it is more than evident that macro problems of a global nature are not weighing in right now, but only problems specific to the crypto markets themselves.
Bitcoin’s price hit an annual low at $15,500 on 9 November, and today its price is back at those levels. Weighing most heavily is the risk of Genesis Global Capital’s bankruptcy, which could put the giant Genesis Digital Currency Group (DCG), of which Genesis Global Capital is a part, in trouble.
During the 2018 bear market, the price of Bitcoin fell 85% from previous highs, and something very similar happened in the previous bear market of 2014/2015.
Since these were Bitcoin’s only two post-bubble bear markets, something similar could be expected during 2022.
In that case, the price of BTC could fall as low as $11,500, or a loss of 26% from current values.
This consideration leads one to believe that a 75% drop in the price of ETH, bringing it back to $250, is even more unlikely, and actually it appears that a 40% drop to $600 is also unlikely.
However, crypto markets are used to surprise us, so such a scenario should not be considered impossible.
The crypto whales
Meanwhile, there are those who are accumulating.
As Santiment reports, Ethereum’s big whales have accumulated another 947,940 ETH in recent days, with a total value of more than $1 billion.
🐳 #Ethereum's large whales (holding $10.9M to $1.09B) have added 947,940 more $ETH yesterday worth ~$1.03B. This is the 5th largest single day add in the past year. The past 4 instances, $ETH's price vs. $BTC rose an average of +3.2% the following 3 days. https://t.co/g4RdgE0Gzj pic.twitter.com/TVYkj4xVrU
— Santiment (@santimentfeed) November 21, 2022
This is the fifth largest accumulation day during 2022.
So while there are many who are selling frightened by the possibility of new collapses, there are also those who are taking the opportunity to accumulate in the hope that the price in the coming months or years will rise again.
In this dynamic, we can clearly see a short-term logic opposed to a long-term one. After all, as the celebrated investor Warren Buffet had occasion to say, “the stock market is designed to transfer money from the active to the patient.”
The capitalization of crypto markets
Right now the crypto markets as a whole capitalize about $810 billion.
At its peak, in November last year, this figure rose above $3 trillion for the first time, but by June of this year, it had already fallen below $900 billion.
The current level is not only the lowest in 2022, it is also the lowest in the past two years. In fact, on 3 January 2020, at the height of the bull run, it exceeded 800 billion, and so far it has never fallen below that figure again.
It is worth noting that in early December 2020, i.e., before the last major speculative bubble began to inflate, its total value was less than $600 billion, which suggests that a -25% from current values is still possible.
This is also why a possible Bitcoin price dropped to $11,500, or an Ethereum price dropped to $600, would be eventualities to be seriously considered, and absolutely in line with past cycles.
Image credit given by Bybit