Ethereum's price has experienced a significant downturn today, driven by escalating global trade tensions. President Trump's recent imposition of tariffs on Canada, Mexico, and China has sparked fears of inflation and economic uncertainty, leading to a broad sell-off in financial markets. This has particularly impacted Ethereum, which is heavily involved in decentralized finance (DeFi) markets and susceptible to leveraged trading dynamics. Sean Dawson from Derive.xyz noted that Ethereum's role in DeFi has made it vulnerable to "a powder-keg of chain liquidations with sudden price changes," as nearly $170 million of collateral was sold to meet margin calls on platforms like Aave V3.
The market's reaction has been severe, with Ethereum experiencing its largest liquidation event in over two years. Analysts like MaxBecauseBTC have compared the current situation to the March 2020 COVID crash, highlighting the scale of the sell-off. The renewed trade war has injected a risk-off sentiment, causing traders to seek downside protection through put options, further exacerbating the volatility. Rick Maeda from Presto Research pointed out that the put-call ratio surged, indicating a rush for downside protection among market participants. This has led to a significant shift in market positioning, with market makers withdrawing liquidity and adding to the volatility.
Ethereum's price has plummeted by 8.67% today, reaching a low of $2,326.97 before stabilizing at $2,620.45.