The Volatility in the Broader Digital Currency Ecosystem Is at Its Peak, with a Visible Impact on Ethereum (ETH)

The volatility in the broader digital currency ecosystem is at its peak, with a visible impact on Ethereum (ETH). For the first time this year, Ethereum's price dropped below $2,000 as bear action sets a new bearish milestone.

The cryptocurrency market has been highly volatile in recent times, with several factors contributing to the price swings. As a result, some cryptocurrencies have sustained more significant selloffs than others.

Bitcoin (BTC) and Ethereum (ETH) have both seen significant price drops in recent weeks, as has Solana (SOL), which is among the top liquidated altcoins.

Cryptocurrency Prices Today, February 14

BTC price today is $78,220, down by 5.92% in 24 hours. The sixth largest cryptocurrency, Cardano (ADA), saw the most significant price selloff in 24 hours, with a price decline of 6.18%.

Among the top cryptocurrencies, Solana had the highest 24-hour volume, with $34 million liquidated from traders.

At the time of writing, the price of ETH is $1,901.36, down 5.45%. The second-largest cryptocurrency is trading below the $2,000 level, a bearish milestone.

The volatility in the broader digital currency ecosystem is at its peak, with a visible impact on Ethereum. For the first time this year, the price of ETH dropped below $2,000.

However, the volatility impacts Bitcoin and other cryptocurrencies, such as SOL and XRP. Since December 14, the price of ETH has dropped by about 50% as the market sheds $1.2 trillion.

There are several layers to this selloff, with the Donald Trump-influenced economic uncertainty being the most discussed.

The crypto market is known for its volatility, and this can be a significant factor in the liquidation of traders’ positions. When the market moves rapidly in one direction, it can trigger margin calls from exchanges, leading to the forced closure of trades.

This liquidation activity can amplify the price moves even further, creating a vicious cycle that spins out of control. In the past 24 hours, over 268,000 traders have been liquidated from their positions, with total assets liquidated amounting to $828 million.

Of the total assets, ETH liquidation in 24 hours is $197.18 million. While long liquidations top $157 million, short traders account for $39.82 at the time of writing.

Why Is The Crypto Market Falling?

According to The Kobeissi Letter analysis, crypto and the S&P 500 have lost $5.5 trillion in the last 2 months. Kobeissi partly attributed the selloff to the February 1, 2025, trade war.

However, the market has been anticipating this trade war since mid-June 2024 during the US Presidential campaigns. Before the tariff hike threats, most stock indices, like the S&P 500, recorded new highs.

The report noted that the real culprit behind the market selloff is the shift in risk appetite. In a matter of days, the market has moved from extreme greed to extreme fear.

There is a precedent to this selloff. The percentage of capital in the Magnificent 7 has recently dropped significantly. This trend trickled down into the crypto market.

As of February 9, the institutional build-up into short Ethereum positions attained its largest level in history. Unfortunately, it coincided with the embrace of BTC and altcoins in hopes of a crypto strategic reserve.

With the relative disappointment in the strategic reserve play, investors have to exit key market positions picked earlier.

At the moment, the sentiment in the crypto industry cautions risk-averse investors. With more than $3.5 billion in outflows over the past week, bears in the market are likely getting exhausted.

Crypto Market’s Strategic Play for 2025

According to The Kobeissi Letter, there is an incoming shift in positioning overall. The publication noted that investors who get ahead of these shifts will be the biggest winners this year.

It noted that bullish swings are bound to broaden since the Volatility Index has surged by over 70% in the past 30 days.

As Kobeissi noted, the Dow Jones will likely experience at least a 1,000-point surge moving forward. Considering the correlation with crypto, Bitcoin and Ethereum prices may also see an increased rally.