Worst Liquidations Since 2021, Is Ethereum Set to Fall Below $2,000?

▲ Ethereum (ETH)

Ethereum has reached a critical crossroads that could determine its future price direction, as it wages a precarious battle around the $2,000 support level amid massive leveraged liquidations in the derivatives market.

According to a February 13 report by crypto-focused outlet NewsBTC, the Ethereum (ETH) market has recently undergone a large-scale leverage reset accompanied by a sharp decline in futures open interest. A report from on-chain analytics platform CryptoQuant shows that approximately 75 million ETH in futures open interest has vanished across major exchanges, signaling that investors have entered a deleveraging phase, pulling capital out of risk assets. On Binance alone, open interest decreased by around 40 million ETH over the past month, while exchanges such as Gate.io and OKX also recorded liquidations amounting to millions of ETH.

This rapid contraction in the derivatives market has intensified fear, occurring as Ethereum struggles below the psychologically significant $2,000 level. As the asset fails to reclaim this symbolic threshold and continues to show sluggish price action, traders who relied on high leverage are being either forcibly liquidated or voluntarily exiting the market. Analysts note that this reset marks the longest ongoing liquidation phase since mid-2021, representing both the removal of speculative excess and a severe dampening of investor sentiment.

From a technical perspective, Ethereum stands at a crossroads between further decline and potential rebound, with selling pressure still dominant. The seven-day average of long-position liquidations has reached approximately 9,000 ETH, reflecting sustained downward pressure. However, some observers suggest that such large-scale liquidations could indicate a capitulation phase marking the peak of selling. While the unwinding of overcrowded positions may temporarily tighten market liquidity, the clearing out of weak hands could ultimately lay the groundwork for a rebound at a new equilibrium.

Capital flows across the broader Ethereum ecosystem show a distinctly cautious stance, heightening tension in both spot and derivatives markets. Unlike Bitcoin (BTC), which has maintained relatively resilient performance, Ethereum is fully absorbing the aftershocks of the leverage reset. This trend also aligns with institutional investors’ tendency to avoid short-term volatility risks associated with Ethereum. Market participants view the stabilization of derivatives open interest and the return of liquidity to the spot market as key factors for any meaningful price recovery.

In conclusion, Ethereum is undergoing a significant structural adjustment in the derivatives market as it searches for long-term direction. Whether it can reclaim the $2,000 support level will serve as a measure of broader market confidence beyond a mere price recovery. Following the completion of the leverage reset, supply-and-demand dynamics are expected to determine whether the market can enter its next bullish phase. Investors should closely monitor signs of further large-scale liquidations and confirmation of a bottom in open interest while responding with caution.

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