Last two months have not been great for cryptocurrencies in a major way. We’re going through the worst bear phase of this market since ever, and it seems that things are not going to settle down anytime soon. As a part of these negative developments in the prices of major cryptocurrencies, Ethereum made a new record on Friday. The short positions on Ethereum’s price reached a record level, which suggests that people expect Ethereum’s price to fall even more. At the time of writing this article, the price has already reached $204.
While this bear market has taken a toll on the market cap of all major cryptocurrencies, it seems that Ethereum is by far the worst hit by this phase. Since its peak price of $1,500 in January, it has lost about 90% of its value. And now there’re 300,000 short positions on its price (which is an all-time high), suggesting the price of world’s second largest cryptocurrency to fall even more.
One of the reasons behind this decline in price is sizable sell-off being done by ICOs. A picture seems to be emerging that after this bear market we’re in a situation where almost 80-90% of ICOs are trading below their initial listing price. In such a situation to finance their operations and to make up for the potential losses, many of those ICOs are selling their positions in Ethereum.
Another reasoning behind the decline suggests that the spike in short positions has something to do with the ongoing correction in major stock markets. Some analysts, however, seem to disagree with this notion. For example, Thejas Naval of Element Digital Asset Management firm says:
“There’s a narrative that the crypto market was simply falling in lockstep with the equity markets, which are slowly entering into correction zones. We believe this move in cryptocurrencies had nothing to do with the stock market.”
However, even Naval doesn’t outright reject a connection between major stock indices and prices of cryptocurrencies. There’s evidence to prove that, and Naval accepts it. But he doesn’t attribute the current decline of crypto market to stock market.