The recent imposition of tariffs by President Trump on Canada, Mexico, and China has triggered a wave of economic uncertainty, leading to a broad sell-off in financial markets. Ethereum, heavily involved in decentralized finance (DeFi) markets, has been particularly affected due to its susceptibility to leveraged trading dynamics. The market has witnessed Ethereum's largest liquidation event in over two years, with nearly $170 million of collateral sold to meet margin calls on platforms like Aave V3. This has injected a risk-off sentiment, prompting traders to seek downside protection through put options, further exacerbating the volatility. The put-call ratio has surged, indicating a rush for downside protection, while market makers have withdrawn liquidity, adding to the volatility.
The Volatility Shares Trust 2x Ether ETF (ETHU) experienced a dramatic decline, plummeting 37.8% to $4.46 as of 7:40 AM on Monday, February 3.