Recently, there has been a constant buzz in the market saying 'ETH has hit the bottom, now is the time to buy at 1500', but in reality, it hides risks. The ultimate sell-off in this bear market may not have started yet. Factors such as escalating trade wars, institutional sell-off risks, and black swan events could severely impact Ethereum's price again, making the current buying risk extremely high.
The trade war has triggered a global liquidity crisis. On March 20, the Trump administration imposed a 34% punitive tariff on Chinese goods, leading to a rapid withdrawal of foreign capital. The net selling of northbound funds reached 23.7 billion yuan in a single day, a new high since October 2022. Risk assets were sold off, with the market capitalization of major US tech giants evaporating by $4.7 trillion, and Bitcoin plummeting 18% in 24 hours. Ethereum's on-chain data also raised alarms, as the exchange's ETH balance surpassed 18 million, the highest level since May 2023, intensifying the selling pressure. Looking back at the 2018 US-China trade war, ETH fell from $800 to $83, a 90% drop. This trade war is more severe, coupled with global de-dollarization, making ETH likely to become a victim.
Institutional whales, such as MicroStrategy, also pose a sell-off risk for the ETH market. MicroStrategy holds a large amount of BTC and ETH, but its balance sheet is on the verge of collapse. The convertible bonds maturing in 2025 amount to $1.2 billion with an annual interest rate of 11.5%, and it has $870 million in ETH collateralized loans with a collateralization ratio of 40%. If ETH falls below the warning line of $1600, it will trigger forced liquidation. In November 2022, when FTX collapsed, MicroStrategy sold 50,000 ETH in a week, causing prices to plummet by 27%. Currently, its ETH holding cost is $3200, and if forced to liquidate, a sale of 200,000 ETH could drive the price below $1200, triggering a chain reaction of institutional sell-offs.
The risk of a black swan is also imminent. The US SEC may redefine ETH from a 'commodity' to a 'security'. If this happens, major trading platforms will delist ETH. Referencing the 74% drop of XRP after being sued in 2023, the price of ETH is concerning. In terms of DeFi protocols, Curve Finance's locked amount has fallen below $1 billion, with a staking rate of over 85%; Lido's staked ETH exceeds 6 million, with significant liquidation risks in the $1400 - $1500 range, potentially triggering a $5 billion chain liquidation. Additionally, the commercial real estate loan default rate for US commercial banks has reached 8.2%, nearing the 2008 level. During a banking crisis, institutions may sell ETH, as seen in the Silicon Valley Bank incident in 2023, where ETH dropped 42% within the month.
In the face of a complex market, smart funds have already implemented countermeasures. For hedging, buying ETH put options with a strike price of $1200 and a premium rate of 23%, and configuring a BTC/ETH arbitrage portfolio (current BTC/ETH exchange rate is 60, historical bottom range is 45 - 50). In terms of position management, keep spot positions within 20%, set a hard stop loss at $1500, and leverage should not exceed 5 times. At the same time, closely monitor on-chain indicators (such as when exchange ETH balances fall below 16 million, indicating potential stability, and changes in whale holdings) and policy signals (SEC regulatory classification, Federal Reserve interest rate decisions, with possible rate hikes of 25BP in June).
Looking back at the FTX collapse in 2022, ETH fell from $1600 to $880; during the Silicon Valley Bank incident in 2023, BTC dropped from $25,000 to $16,000. Bear market bottoms often come unexpectedly. The current risk of buying ETH at the bottom is extremely high; cash is king in a bear market. Wait until institutional sell-offs are exhausted, regulations are implemented, and the fear index drops below 20 before buying at the bottom, which offers a higher chance of success.
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