What’s Behind Ethereum Price Drop? Whale Moves & Exploit Trigger Selloff

Ethereum has not become a completely different story in a day. The fundamental of the coin did not fall, and neither did the technology. What then happened to the price? It dropped, and so did the net worth of many investors. 

This week, Ethereum (ETH) experienced a drop of over 7% in just 24 hours due to the combination of structural pressure, the overlapping of the unexpected exploits, and of the classic whale activity, which led to a storm. The question now in the market is what was the reason behind this Ethereum drop and what would it mean for ETH price in December?

The Decade-Old Ethereum Whale Wakes Up

The main reason for the panic wasn’t an exploit or a liquidation, instead it was the history repeating itself. A 2015 Ethereum ICO wallet that had been inactive for a long time moved 40,000 ETH suddenly, which had been bought for just $12,400 at $0.31. This amount is now worth around $120 million, which is a huge return of approximately 9,677 times. Right away, Crypto Twitter was alarmed, but not every movement of a whale represents a menace.

The analysts very quickly gave the explanation for it. Lookonchain verified that it was for internal transfer, and not a liquidation. “The transfer appears to be an internal move, not a liquidation event”. Among the noise, rarely is there a case when such a dormant whale reactivation does not lead to more social media hype than actual market dumping. Historically, these events bring in very short term fear, but rarely change the liquidity profile of ETH. That was the case again. The whale came out, but the market panic was self-imposed.

The Yearn Finance Exploit

The actual reason behind the crash was a Yearn Finance exploit, reported by CoinDesk, that happened at the worst possible time. The market stretched by leverage and rising speculative positioning. As soon as the exploit was disclosed, ETH futures unwound immediately and more than $600 million in crypto liquidations hit the market, as per CoinGlass.

CoinGlass data indicates that the open interest of ETH futures had an impressive surge during the last week of November, and started to drop because of a sudden short-term flush. The retail traders blamed the “insiders” for selling it right before the exploit, but there is no proof that this theory is true, which is a typical scenario in crypto whenever the market plummets unexpectedly.

At the same time, the well-known Taiwanese whale Machi Big Brother got into trouble once again. His over-leveraged positions were partially liquidated, and he was left with 3,300 ETH at a 25x leverage, a liquidation price of about $2,831.58, along with screenshots indicating an ROE of -108%, and over $1.7M in forced closes.  

Current Market Conditions

Although the crash occurred, Ethereum is still facing difficult times. The following key indicators provide evidence of this.

• Fading Spot Volume (CoinGecko): Declining spot demand suggests that real buyers are still not coming in aggressively. Thus, the price of ETH is at risk from future liquidations.
• High Leverage Remains (Glassnode): Even after the flush, funding rates still indicate very high-risk taking activities. The markets are still inclined towards speculative long positions.
• Global Liquidity Tightening (FRED): Japan has indicated tightening, and U.S real interest rates remain high. Under low liquidity conditions, even minor shocks can trigger significant price changes.

It did not Crash, It Just Overreacted

The decrease of Ethereum was not a collapse of trust or a failure of the fundamentals. It was a classic cryptocurrency mix, with an exploit, a whale panic, and excessive leverage, which shook everything. On the bright side, ETH is still structurally strong going into December. The downside is that the stormy market remains for a while. The technology is okay, but investors may require tougher nerves to handle such situations.