The crypto market has experienced significant turbulence recently, with Ethereum leading the downturn. As BTC/USD hit its lowest weekly close since December 2020, ETH followed suit with a steep plunge. By June 13, overnight losses pushed major cryptocurrencies toward 10-month lows last seen in May. This correction primarily stems from:
- Inflation shockwaves from US economic data
- Low weekend liquidity amplifying crypto volatility
- Mass liquidations across derivatives and DeFi platforms
According to Coinglass data, over $521 million in ETH positions were liquidated in 24 hours. Below, we analyze three critical developments impacting Ethereum's price action.
Key Events Shaping Ethereum's Market Dynamics
1. The stETH "Depegging" Event in Ethereum 2.0 Staking
How Beacon Chain staking works:
Users deposit ETH with service providers who:
- Lock ETH into Beacon Chain contracts
- Issue liquid staking tokens (e.g., stETH) as receipts
- Enable 1:1 redemption for ETH 2.0 post-Merge
The Celsius Trigger:
When Celsius Network—a major crypto lender—revealed:
- Only 27% of user ETH deposits were readily available
- 44% required stETH-to-ETH conversions via Curve Finance
- Potential insolvency if redemptions exceeded reserves
This sparked panic selling, causing stETH to trade at a 15-20% discount to ETH. While technically not a protocol failure (since stETH still converts 1:1 post-Merge), the event exacerbated market fears.
2. MakerDAO's ETH Fire Sale
The leading DeFi protocol took drastic measures:
- Sold 65,000 ETH at $1,155 avg. price
- Later liquidated 27,946.97 ETH ($33.5M)
- Total ~90,000 ETH sold to cover debts
This highlights broader DeFi contagion:
- Projects offloading ETH to maintain solvency
- $521M in ETH liquidations compounding sell pressure
- Protocol-owned ETH becoming a liability during downturns
3. Macroeconomic Headwinds
June 10 marked a turning point when:
- US CPI hit 8.6% (highest since 1981)
- Fed signaled aggressive rate hikes
- Investors fled risk assets (stocks, BTC, ETH)
ETH dropped 20% in six days as:
- Institutional players like Three Arrows Capital exited positions
- Market sentiment turned overwhelmingly bearish
- Traders anticipated prolonged monetary tightening
FAQ: Understanding Ethereum's Decline
Q: Is stETH permanently depegged from ETH?
A: No. Post-Merge, stETH remains redeemable 1:1 for ETH 2.0. Current discounts reflect liquidity crunches, not protocol failure.
Q: Why did MakerDAO sell ETH?
A: To prevent undercollateralization in its vaults. Like Celsius, they faced redemption pressures requiring asset liquidation.
Q: When might ETH stabilize?
A: Likely after:
- Fed policy becomes less hawkish
- Ethereum completes The Merge successfully
- DeFi leverage unwinds further
👉 Track real-time ETH price action
Long-Term Outlook
While current conditions appear bleak:
- Blockchain technology continues evolving
- Ethereum's transition to PoS promises efficiency gains
- Market cycles historically include recoveries
As Zhu Su (Three Arrows Capital) shifted focus solely to Bitcoin, it signals extreme fear—a potential contrarian indicator. However, with CPI still elevated and quantitative tightening ongoing, caution remains prudent.
For those monitoring opportunities:
- Wait for clear technical stabilization
- Watch Merge implementation progress
- Prepare for potential "sell the news" volatility
👉 Explore ETH staking alternatives
Disclaimer: This content represents market commentary only, not financial advice. Conduct independent research before making investment decisions.