Tom Lee’s Bitmine might be acquiring ETH, while Vitalik Buterin and others seem to be divesting.

Ether has fallen below $2,000, lagging behind other significant cryptocurrencies as selling intensifies from leveraged traders, on-chain liquidations, and long-term holders.

Bitmine chairman Tom Lee (Modified by CoinDesk)

What to know:

• Onchain statistics reveal that tens of thousands of ETH have been liquidated in recent days to settle Aave loans, initiating a cycle where declining prices prompt further selling to prevent liquidation.
• As the primary collateral and leverage asset in the crypto market, ether is frequently the first to be sold when traders unwind positions, exacerbating downturns compared to BTC and other large caps.
• Corporate ETH holders, initially viewed as a new group of long-term investors, are now facing significant unrealized losses, transforming what was anticipated to be a support level into a potential burden.

Ether ETH$2,113.11 has faced significant challenges recently, falling below $2,000, with sell pressure originating from various sectors of the market, including Ethereum founder Vitalik Buterin and derivatives traders.

The second-largest cryptocurrency is currently valued around $1,950, down 60% since August and 42% since January 14.

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Its difficulties can partly be ascribed to what analysts term the latest crypto bear market, yet ETH has notably underperformed other large caps such as BTC, XRP, and ADA, which have declined closer to 35% since mid-January.

This deviation from its counterparts has been exacerbated by a series of sales from Vitalik Buterin, along with recent actions from derivatives traders.

Onchain analysts have indicated that an entity has been liquidating substantial volumes of ETH on decentralized derivatives platforms to repay loans on Aave.

The wallets involved have divested approximately 47,000 ETH (valued at $120 million) over the past four days, including around 31,700 ETH within a mere five-hour period, according to data provided by MLm onchain.

They still possess nearly 50,000 ETH as collateral on Aave, with about $86 million in USDC borrowed against it. With ETH declining, the position is now nearing liquidation, necessitating further selling to remain solvent.

This scenario is a familiar feedback loop for ether holders: price declines, collateral weakens, debt is repaid, and more ETH enters the market.

ETH is falling harder than the rest

Ether’s particularly sharp decline is attributed in part to its status as the primary asset for leverage in crypto, meaning when traders are compelled to unwind, ETH is often the first to be sold.

Additionally, it reflects a market that is currently struggling to identify reasons for purchasing.

Former White House communications director Anthony Scaramucci posits that ETH is facing difficulties due to institutional investors’ preference for bitcoin.

“I think what happens when institutions come in, they’re probably going to buy the oldest asset,” Scaramucci stated in an interview with OANDA. “And so it’s Bitcoin. Now, can they potentially purchase Ethereum? I would say yes….But generally institutions are going to favor something like Bitcoin. This isn’t to say that it won’t diversify in the future, but that’s where things stand at present.”

Furthermore, a segment of the market engages in delta-neutral strategies, acquiring spot ETH and lending it on platforms like Aave, while simultaneously shorting the asset on futures. These traders do not have directional exposure but may be compelled to increase their short positions if funding rates change, which could lead to additional sell pressure.

Treasury buyers are feeling it too

One of the more positive developments for ether over the past year was the emergence of ETH treasury companies—entities that acquire and hold ETH in a MicroStrategy-style investment.

The expectation was that these corporates would introduce a new category of long-term buyers, absorbing supply and establishing a price floor in the market.

However, that has not transpired as anticipated.

With ETH now down over 50% since August, many of these companies find themselves with losses, having bought at prices that seemed reasonable at the time but are now painful to reflect upon.

Tom Lee’s BitMine (BMNR) is one of the most recognized examples. Lee has consistently been optimistic about ether, and BitMine’s ETH position has been characterized as strategic rather than speculative.

BitMine currently possesses 4.29 million ETH tokens, valued at $9 billion, with 57% staked to generate yield. Data from Dropstab indicates that a total of $16.3 billion has been invested, resulting in an unrealized loss of $7.3 billion.

The company even purchased the dip earlier this month, acquiring $100 million of ETH at $2,300, but this acquisition failed to halt the ongoing sell pressure, as ETH subsequently fell below $2,000.

However, it is challenging to maintain the role of “strong hands” when the asset continues to decline, and others are selling into the weakness.

Rather than providing support, these treasury holdings are beginning to resemble another potential burden—not because they are selling today, but because the market is aware that they are in a precarious position.

No obvious buyer

Ether’s current issue is not linked to a solitary wallet or a single liquidation.

Sell pressure is emanating from multiple sources: founders reducing exposure, leveraged traders unwinding, and holders facing losses seeking exits.

Ethereum remains the leading smart contract platform. None of that has changed.

However, in this market, ETH is not trading based on fundamentals. It appears to be trading like an asset that no one is eager to acquire.

Except, seemingly, Tom Lee.