Ethereum Experiences Widespread Derivatives Ripple: Can Bulls Hold $2,300?
Ethereum has been under heavy selling pressure, recording a sharp drop of 28% since last Friday as the price firmly lost the psychological level of $3,000. What initially appeared to be a controlled pullback quickly escalated into one of the most aggressive moves seen in recent months, reflecting a sudden shift in market sentiment and risk appetite across the crypto space.
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On January 31, the Ethereum market experienced a major participation event. ETH dropped from over $3,000 to the $2,350 area in less than an hour, marking one of the highest one-day corrections of this cycle. The speed and magnitude of the movement suggests forced selling rather than systematic distribution. As the price rose at a slower pace, a dense set of stop-loss orders and closures were triggered, fueling inflation and a staggering amount of bid-side liquidity.
This quick reversal erased weeks of bullish momentum almost instantly. Traders who were in the $3,000 continuation position were caught offside. Which leads to extensive restructuring of derivatives exposure and perception. The psychological impact of losing such a widely-watched standard has further strengthened the sell-off, reinforcing risk-averse behavior in both existing and future markets.
As Ethereum stabilizes below previous support, investors are now reassessing whether this move represents a temporary wash or the early stages of a deeper correction phase. The times ahead will be crucial in determining whether demand can re-emerge after this violent reset.
Market-Wide Deleveraging Resets Ethereum’s Derivatives Landscape
CryptoQuant’s analyst explains that the latest on-chain data confirms that Ethereum’s sales were driven by the leveraged flush market rather than organic distribution. According to the Ethereum Long Liquidations (All Exchanges) chart, total liquidated long positions rose to nearly $485 million, marking the second largest liquidation event since October 10.
These spikes force a reset of the derivatives market by quickly unwinding very high positions following an extended period of increased risk.
However, a closer look reveals important differences. When referencing the data of global liquidation data by Binance chart (All Signals), Binance recorded about 40 million dollars in long-term liquidation during the same period. This means that Binance accounts for less than 10% of the total global liquidation. Despite being one of the largest derivatives by volume. These imbalances indicate that some exchanges are focused on excessive participation and aggressive risk-taking, which has led to severe liquidation cases.
This difference means that traders on Binance have not been overly aggressive or employed with strict risk management. Allowing them to withstand a sharp downside move effectively. In contrast, other stadiums were burdened by forced relegation.
From a broader perspective, this type of long compression often eliminates perceived extremes. Although bullish positions are painful, they often set the stage for recovery as the market looks for a new equilibrium. Monitoring open interest and funding levels outside of Binance will be important, as the main drivers of volatility clearly come from outside of its ecosystem.
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Price Drops as Bearish Momentum Accelerates
Ethereum’s price structure has deteriorated significantly, and the chart highlights how the market has firmly shifted into bearish territory. After failing multiple times to recover the $3,000–$3,200 area, ETH broke down strongly, cutting through previous support levels with little resistance. The recent move below $2,400 marks a clear extension of downside momentum instead of a controlled pullback.
From a trend perspective, ETH is trading below short- and medium-term moving averages, with the 50-day and 100-day MAs acting as strong resistance. The decreasing slope of these averages reinforces the likelihood that traders will target rallies rather than expansions. The 200-day moving average, which is sitting very high, confirms that the broader structure has moved away from a bullish trend.
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Volume behavior adds another layer of concern. The sale of the $2,300 spot was accompanied by higher volume, indicating forced sales and speculation rather than organic distribution. This trend is consistent with recent closing data and indicates that the market has removed significant strength.
In the short term, the $2,300–$2,200 area is an important area to watch. It represents the first meaningful support after a breakup. Failure to settle here can open the door to serious setbacks. The chart suggests that the path of least resistance remains to the bottom.
Featured image from ChatGPT, chart from TradingView.com
