Ethereum has tumbled below the psychologically significant $2,000 threshold, succumbing to intense selling pressure. The dramatic price decline was precipitated by aggressive forced liquidations from a major crypto fund, which flooded the market with supply. While fears of further credit defaults circulate, fundamental network participants appear unfazed by the panic-driven sell-off.
Institutional Holders Maintain Steadfast Stance
Amidst the capitulation from funds and retail traders, strategic corporate investors are holding their ground. In its January operational update, Bit Digital (Nasdaq: BTBT) confirmed it continues to hold 155,239 ETH on its balance sheet. Approximately 89% of this inventory is actively engaged in staking to generate ongoing yield. Data from February 6 indicates that Bit Digital has not deviated from its strategy, despite the severe market downturn.
A Fund’s Fire Sale Creates Downward Spiral
The primary catalyst for the recent crash was the liquidation activity of the crypto fund Trend Research. To meet margin calls and credit obligations, the firm offloaded approximately 170,033 ETH onto the market within a mere ten-hour window on February 6. This equates to a value of roughly $322.5 million. This substantial sell-off formed part of a broader deleveraging campaign, which saw over 188,500 ETH sold throughout the course of the week.
The overhang for the market persists, however. Current data indicates Trend Research still holds a significant remaining position of about 293,121 ETH. This inventory acts as a persistent threat to price stability. Market analysts estimate the fund’s new liquidation thresholds now reside in the $1,562 to $1,698 range. A drop by Ethereum into this zone risks triggering another wave of mandatory sales.
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Critical Technical Levels Under Threat
The technical picture remains precarious following Friday’s more than 15% collapse, which pushed Ethereum to a new 52-week low. Immediate price support is now established at $1,796. Analysts warn that a breach of this level could precipitate a further slide toward $1,670, driven by the liquidation risks of large on-chain entities. A sustained recovery is unlikely until the asset can reclaim the $2,000 zone.
ENS Labs Shifts Strategy Amid Lower Fees
Separate from the price action, a fundamental infrastructure development emerged. On February 6, ENS Labs announced a surprising strategic pivot, halting development of its proprietary Layer-2 network, “Namechain.” Instead, the upcoming ENSv2 upgrade will be deployed directly on the Ethereum mainnet.
The decision was justified by the dramatically reduced transaction costs, or gas fees, on Layer 1, which have fallen by 99% over the past year. Ethereum co-founder Vitalik Buterin praised the move as “smart.” This aligns with his recent criticism of generic Layer-2 solutions, which he argues often replicate existing environments without delivering genuine added value.
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