Ethereum (ETH) Market Cap Drops Over $124 Billion in Six Weeks

Ethereum, the second largest cryptocurrency by market capitalization, is currently in free fall. Over $124 billion in capital disappeared from Ethereum (ETH) decentralized finance (DeFi) in six weeks.

Seven months ago, ETH reached its all-time high of $4,891.70 on November 16, 2021. But it is currently trading at around $1,100, 75.2% lower than its all-time high value.

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The beginning of 2022 was volatile for the crypto market, especially for ETH, but in the previous weeks, things have become much more complicated. However, the larger crypto market continues to decline due to macroeconomic uncertainty fueled by volatile equity markets, rising interest rates, and crisis fears.

The Ethereum DeFi Market is Getting Substantial Delegation

Glassnode, a blockchain analytics company, release a report on June 17. The report was titled “DeFi’s Great Authorization.” The report states that over $124 billion of capital was withdrawn in just six weeks from the Ethereum DeFi market. As a result, its market value is rapidly declining.

According to their statement, a variety of reasons led to a flurry of margin calls, liquidations and write-offs. These reasons include tightening monetary policy around the world, the growing strength of the US dollar, and falling risk asset values.

Their analysis looks at several early warning signs that predict a drop in ETH usage and community demand following the all-time high ETH price in November 2021.

They claim that on-chain activity and Ethereum gas prices have been falling for six months. This indicates a drop in the overall Ethereum network activity.

As stated in the report:

Across many aspects of the Ethereum ecosystem, the demand profile has weakened, with overall application usage dropping and network congestion easing after the November 2021 ATH and the cooling of the NFT market becoming evident in recent weeks.

TVL on Ethereum is down 60%

According to the report, Ethereum’s TVL (Total Value of All Ether) has dropped by 60% in six weeks. The drop took place in two phases. In May, Terraforms Lab’s project collapsed and caused a loss of $94 billion. And in June, ETH fell below $1,000, resulting in a $30 billion loss.

According to the report, only two deletion events were on average higher intensity:

The first was -46.0% in relation to the recent LUNA crash and -37.5% in the sell-off from then-ATH set for May 2021.

The combined market valuation of the top four stablecoins USDT, USDC, BUSD, and DAI has now exceeded ETH’s market valuation of $3.0 billion.

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Glassnode claims that the ongoing write-off is very painful and resembles a mini-financial crisis. However, they add that while this is difficult, it provides an opportunity to remove excess leverage and rebuild in a healthy way.

            Featured image from Flickr and chart from TradingView.com