Ethereum experienced significant volatility over the past 24 hours, dropping 11% to below $2,380 before recovering slightly by over 4%, according to The Block's Price Page. The recent sharp downturn has raised concerns among institutional investors about the medium-term trajectory of the second-largest cryptocurrency by market cap.

CF Benchmarks Head of Product Thomas Erdösi noted a clear increase in downside hedging by institutional participants in CME Ethereum options. “There is a clear uptick in downside hedging interest for Ethereum, as seen in the week-on-week change in CME ETH options open interest from Feb. 18 to Feb. 24 for the March expiration,” Erdösi told The Block.

Erdösi highlighted that the $2,000 strike has witnessed a significant rise in open interest, reflecting growing caution among investors. Simultaneously, there has been a noticeable rotation out of far out-of-the-money calls, particularly at the $7,000 strike, as market participants temper expectations for a substantial breakout. “In essence, market participants appear to be scaling up Ethereum downside positions around the $2,000 level,” Erdösi added.

Further compounding bearish sentiment, on-chain data analyzed by Biget Wallet COO Alvin Kan revealed that three significant MakerDAO positions are at risk of liquidation if Ethereum's price drops to $1,926, $1,842, and $1,793.

“With $340 million in potential MakerDAO liquidations on the horizon, Ethereum’s recent sell-off has put leveraged longs in a tight spot,” Kan told The Block. “The $296 million already wiped from Ethereum positions signals that forced selling has begun, and if liquidations accelerate, downward pressure could intensify rapidly.”

Kan added that any further downside for Ethereum would amplify this effect, triggering a chain reaction of forced exits. "However, it’s not all doom and gloom—if buyers step in or liquidity stabilizes, the market could see a sharp reversal," Kan said. "The next moves will depend on how leverage unwinds and whether spot demand can absorb the shock."

Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.

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