The technical truth behind ETH's "screaming decline": leverage collapse and multiple technical signals resonance

Event Review: Complete Downward Chain Within 30 Minutes

Recently, in Beijing time, ETH experienced an extremely rapid plunge. The price quickly dropped from about $3126 to $3045, then continued to probe lower to $2991, ultimately stabilizing around $2992.53. This sharp decline was not an isolated event but a perfect storm of collective forced liquidations by leveraged traders, chain reactions in algorithmic systems, and technical breakdowns.

During the entire decline, trading positions with 25x leverage faced partial forced liquidations, with some accounts losing over $315,700. Panic quickly spread across the market. The wave of automatic stop-loss orders and algorithmic trading sell-offs further intensified the downward movement.

Deep Driving Factors: Triple Pressure Overlay

The “Killer” Power of High Leverage

High leverage trading is essentially a double-edged sword. When the market experiences small fluctuations, 25x leverage means an account could face a 4% instant loss—enough to trigger a forced liquidation. Once such liquidations occur, a large number of forced sell orders impact market liquidity, triggering more liquidations and forming a “liquidation chain” effect. This self-reinforcing negative feedback loop can push prices to extreme levels in a short period.

The Chill of Macro Environmental Factors

Decisions like the Federal Reserve’s rate cuts, global regulatory policy adjustments, and economic data uncertainties are all weakening investor confidence in risk assets. Institutional funds tend to “run first” in the face of such uncertainties, withdrawing large liquidity from the market, leading to a surge in retail trading volume but with severely shallow depth.

Technical “Death Cross” Signal

The systematic breakdown of EMA indicators was the technical trigger for this decline. The short-term moving average (EMA10) crossed below the mid-term (EMA20), forming a death cross. The mid-term (EMA20) also crossed below the long-term (EMA50), indicating a shift from an upward to a downward trend. The price fell below all major moving averages (EMA5/10/20/50/120), with the bears fully in control.

Technical Indicator Panorama: Intense Battle of Bull and Bear Signals

Momentum Indicator Warning Signals

The MACD has completed its midline crossover, with the histogram below zero continuously shrinking, indicating that downward momentum is waning but still pointing down. This often suggests the decline may be nearing an end, but some time is needed to build up for a rebound.

RSI has entered an extremely oversold zone (below 30), theoretically leaving room for a rebound, but in such panic environments, oversold conditions may deepen further.

Volume as Concrete Evidence

Trading volume surged by 547.34%, yet prices continued to fall—classic panic selling. More noteworthy is the OBV indicator (On-Chain Volume Balance): What is OBV? Simply put, it accumulates volume to judge the actual flow of funds—rising when volume and price move in the same direction, falling when they diverge. This OBV hit a new low, indicating large amounts of capital are exiting as prices decline. This “same-direction selling” pattern confirms that there are no hidden large buy-in accumulations quietly absorbing the sell-off.

Future Outlook: The Balance of Risks and Opportunities

The Liquidation Chain Has Not Fully Released

As long as high-leverage positions remain substantial, any new downward volatility could trigger another wave of forced liquidations. If the price continues to break below $3000, the next target could be around $2900.

Persistent Macro Uncertainty

Policy developments will be the main driving force in the coming weeks. Investors should closely monitor economic data, central bank statements, and other key signals.

Possibility of Technical Rebound

Based on oversold indicators, a technical rebound may occur in the short term, but this is more of a dead-cat bounce rather than a trend reversal. Only when the price stabilizes above EMA20 can more active participation be considered.

Trading Recommendations

The correct attitude in the current environment is: Control leverage, manage expectations, stay on the sidelines. Avoid chasing highs or bottom-fishing in extreme emotions, set clear stop-loss points, and let the market stabilize itself. As long as the $3000 support remains intact, there is still buffer below; once broken, the market could enter a deeper correction cycle.