Event Review 📝

Recently, the Ethereum (ETH) market has experienced significant volatility. From the evening to the early morning, multiple factors intertwined to drive a sharp shift in market sentiment. Firstly, the uncertainty surrounding U.S. politics and macro policies has suddenly intensified: news from the U.S. House of Representatives about advancing government funding and ending part of the shutdown has led to ongoing internal disputes, causing market funds to become more cautious. At the same time, Ethereum founder Vitalik Buterin's comments on future adjustments to the L2 scaling roadmap have raised certain doubts among investors. High-leverage trading positions and a chain of liquidations subsequently erupted in the market, triggering panic selling and causing ETH prices to plummet significantly in a short period.

Timeline ⏱️

• 02-03 23:32: The U.S. House of Representatives announced the advancement of relevant legislation to end the government shutdown, escalating political and funding uncertainties, and increasing risk-averse sentiment.
• 02-03 23:46: Vitalik Buterin raised questions about adjustments to the L2 roadmap, suggesting that the future Ethereum scaling strategy needs to be repositioned, exacerbating ecological uncertainties.
• 02-04 00:00: The market opened, with ETH prices hovering around $2303; panic sentiment began to emerge.
• 02-04 00:00–01:41: Within 101 minutes, due to high-leverage positions triggering chain liquidations and automatic settlements, ETH prices plummeted from $2303 to $2204, a drop of about 4.30%.
• 02-04 00:00–02:00: The overall market continued to be under pressure, dropping from $2302 to $2176, with a cumulative decline of 5.48%.
• 02-04 02:00: ETH prices stabilized around $2179.55, but market volatility remained, with lingering concerns for the future.

Cause Analysis 🔍

Based on recent news and data, the sharp decline in ETH prices can be attributed to two main factors:

1. Macroeconomic Policy and Political Uncertainty
   Continuous news from the U.S. House of Representatives about ending the government shutdown and controversies surrounding the funding bill have severely disrupted market expectations. Political maneuvering and policy risks have lowered investors' risk appetite, leading funds to seek safe-haven assets, which in turn affected the liquidity of crypto assets.

2. High-Leverage Trading and Chain Liquidation Effects
   The presence of large institutional whales and high-leverage positions in the market exposed liquidity risks. High-leverage operations are prone to trigger automatic liquidations in a tightening financial environment. The series of position reductions and panic selling quickly dragged prices into a downward channel, further triggering a chain reaction.

Technical Analysis 📊

Based on Binance USDT perpetual contract 45-minute candlestick data, the technical analysis of the ETH/USDT market is as follows:

• Price Trends and Volatility:
  Starting from 00:00, ETH prices dropped sharply from about $2303 to $2204, and then continued to decline to $2176, with a cumulative drop of 5.48%. The current price hovers around $2179.55, indicating a situation of tight liquidity and increasing financial pressure.

• Indicator Signals:

• The Bollinger Bands show prices walking along the lower band, indicating a weak trend;

• The KDJ indicator has entered the oversold area, with the J value extremely oversold, suggesting a potential rebound support in the short term;

• The RSI is also in the oversold zone, indicating that buying opportunities may arise with technical repair signals in the oversold area;

• The OBV indicator continues to decline, showing strong selling pressure, but trading volume surged by 211.36%, indicating that participants are emotionally charged during panic selling;

• In terms of moving averages, all short, medium, and long-term moving averages are in a bearish arrangement, with MA5, MA10, MA20, MA50 and EMA5, EMA10, EMA20, EMA50, EMA120 all above the price, further confirming a clear downward trend;

• Additionally, the negative slopes of EMA20 and EMA120 (at -1.33% and -0.55%, respectively) indicate strong downward momentum.

• Liquidation and Large Transactions:
  In the past hour, the total liquidation amount across the network reached $7 million, with long positions accounting for 92%. Meanwhile, a net outflow of approximately $92,281 from major players indicates that the market is experiencing tight liquidity due to the impact of high-leverage operations and panic selling.

Market Outlook 🚀

Although technical indicators show that ETH is currently severely oversold, with KDJ and RSI in the rebound zone, some short-term traders may take profits on dips. However, given that macro policy uncertainties have not been fully resolved and the risks of chain liquidations from high-leverage positions still exist, any recovery rebound may only be a temporary phenomenon. Market participants should remain cautious and avoid chasing high risks, and it is advisable to pay attention to the subsequent direction of Federal Reserve policies and U.S. political dynamics. Additionally, investors need to implement strict risk control and adjust positions in a timely manner to prevent further market fluctuations. If market sentiment can gradually return to rationality and signals of buying support emerge, ETH may present opportunities for accumulation on dips, but short-term downward risks should still be monitored closely.

Overall, the current ETH market is in a state of "deep adjustment," and restoring market confidence may require waiting for macro policy risks to ease and liquidity to stabilize before the market can regain stability. Investors should closely monitor changes in various technical indicators and the latest developments in U.S. political and economic situations, responding flexibly to the rapidly changing market landscape.

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