When everyone thought risk assets were returning to glory, the crypto market experienced a fierce surge this week, with Ethereum's price briefly breaking the previous high of 2788, sparking a frenzy of market expectation for a 'new bull market start.' However, this surge may not be the starting point of a bull victory but rather a long-awaited 'trap for the bulls.'
From the shift in macro policy to weak fund momentum, to structural problems on-chain and impending regulatory pressures, various signs point to this not being a reversal but the final escape wave. Ethereum is standing on the edge of a cliff.
1. The Federal Reserve reiterates its stance for 'higher rates for a longer time', and liquidity collapse is brewing.
Despite the market still holding fantasies about interest rate cuts, the recent statements from the Federal Reserve and discussions by officials have turned hawkish. Digital committee members clearly stated: 'Current inflation remains sticky, and we do not see sufficient evidence of cooling.'
With core PCE remaining high and the labor market still showing resilience, the market has significantly downgraded the probability of a rate cut in September and has even begun to reprice the possibility of 'no cuts but increases' before the end of the year. This is a severe blow to the cryptocurrency market—because its valuation heavily relies on expectations of future monetary easing.
The longer high interest rates are maintained, the less incentive institutional funds have to hold non-yielding, highly volatile assets like Ethereum and Bitcoin.
2. The Trump administration is pressuring Europe, trade war resurfaces, and hedge funds are flowing out of high-risk assets.
US President Trump announced that a new round of high tariffs on EU tech products is imminent and warned that if Europe does not cancel the carbon border adjustment mechanism and digital tax, the US will further expand retaliation measures.
This move has sparked market fears of a global trade chain rupture. The dollar has rapidly strengthened, with funds shifting toward safe-haven assets like US Treasuries, yen, and gold, while risk assets are experiencing large-scale fund adjustments. During the past two days of ETH price increases, the supply of stablecoins has continued to shrink, indicating that the price rise is not driven by net capital inflows but may be due to short-term short covering and institutional behavior to lure in bulls.
3. On-chain data warns: activity freezes, signs of selling pressure emerge.
According to data from Glassnode and LookIntoBitcoin: the number of daily active addresses for Ethereum and on-chain trading volume has declined for three consecutive weeks; NFT and DeFi user activity has sharply decreased, with trading volume on decentralized exchanges like Uniswap dropping over 35%; whale addresses have significantly transferred ETH to centralized exchanges (CEX), with inflows increasing by over 28% in the past 72 hours, resembling the on-chain movements prior to historical sell-offs. These data have not improved with the price increase; rather, they have further deteriorated, indicating that this rebound is merely surface prosperity and conceals enormous risks.
4. The technical aspect has entered a critical stage of 'failed breakout'.
After Ethereum broke through the previous high of 2788, it failed to effectively stabilize, and a typical 'false breakout' signal has appeared in the technical chart. The RSI indicator has entered the overbought zone but has not reached a new high, while the MACD has shown divergence, indicating that momentum is waning.
More critically, in the past 24 hours, the derivatives market has seen a large number of long positions opened, but as prices quickly retreated, open interest surged while prices failed to sustain an upward move, indicating that potential liquidation risks are brewing. Once market sentiment reverses, it could trigger a chain reaction of leveraged unwinding, leading to a flash crash.
5. Regulatory risks are approaching, and stablecoins and L2 are becoming the next targets.
Reports indicate that the Trump administration has drafted a regulatory framework for stablecoins, requiring that all dollar-pegged stablecoins must be issued by banks recognized by the FDIC and that DeFi platforms comply with trade monitoring rules.
This is a massive blow to Ethereum: because stablecoins are the foundation of the DeFi and NFT ecosystems, if strict regulations are enforced, funds will be forced to exit or cannot smoothly enter the system. Layer 2 scaling solutions (like Arbitrum and Optimism) may also be indirectly affected due to not being included in the regulatory sandbox.