Ether plunged to a 13-month low near $1,540 amid a severe market downturn. Derivatives metrics flipped bearish as over $1.28 billion in leveraged long positions were liquidated. The discovery of a critical, AI-identified bug in the ZCash protocol triggered fears of broader contagion, contributing to a sharp contraction in Ethereum’s Total Value Locked and further eroding investor confidence.
Ether dropped to a 13-month low of $1,540 on Friday, extending a broader cryptocurrency market decline. This collapse followed cascading liquidations that eliminated a potential relief bounce.
The Ether futures annualized funding rate flipped negative, indicating heightened demand for short positions. “Low conviction among holders fuels uncertainty, giving bears an easy path to take control,” as noted in market data.
Demand for downside price protection surged, with the Deribit ETH options put-to-call premium spiking to 3.7 times. This consistent excess demand for put options reflects deep-seated bearish sentiment among traders.
Ethereum network Total Value Locked contracted to its lowest level since February 2024. Smaller deposits in decentralized applications reduce ecosystem revenue and demand for ETH use in smart contracts.
Major DApps like Spark, Ether.fi, EigenCloud, and KernelDAO saw TVL contractions ranging from 39% to 50%. Part of this exodus is attributed to a critical vulnerability, discovered by an AI model, allowing unlimited ZEC minting in a ZCash zero-knowledge pool.
The bug had existed since 2022 without detection, raising fears that other blockchains and smart contracts could be at risk. This follows April’s cryptocurrency hacks totaling $630 million, including major exploits on KelpDAO and Drift Protocol.
Currently, only 30% of the ETH supply is profitable relative to when those coins were last moved. This rare setup has previously occurred just before significant market moves.
With over $500 million in leveraged ETH long positions liquidated in 48 hours, a relief bounce appears unlikely. Bitmine, the largest Ethereum treasury firm, reportedly holds an unprecedented $10.5 billion unrealized loss on its substantial ETH holdings.
