Ethereum has increased its gas limits for the first time since 2021, a move aimed at improving network efficiency and potentially reducing transaction costs. This adjustment could enhance Ethereum’s usability and attract more users, particularly as the blockchain ecosystem continues to evolve.
Ethereum Price Declines Amid Market Volatility
Despite this network upgrade, Ethereum has faced significant price pressure. The second-largest cryptocurrency by market capitalisation dropped sharply to $2,368 on Monday, following new tariff announcements by U.S. President Donald Trump. At the time of writing, Ethereum is trading at $2,544, marking a 17.8% daily loss, according to CoinGecko.
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Ethereum’s Gas Limit Increase: What It Means
The broader crypto market has experienced heavy liquidations, with Ethereum leading the losses. Over $2.3 billion in positions were wiped out across 738,000 traders within just 24 hours, per CoinGlass. Ethereum alone accounted for $611 million in liquidations, with long-position traders taking the biggest hit.
Ben Zhou, CEO of Bybit, suggested that the actual liquidation total could be between $8 billion and $10 billion. He believes that exchanges may limit liquidation data, meaning publicly reported numbers could be lower than reality.
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Ethereum Continues to Underperform Against Bitcoin
Ethereum has struggled compared to Bitcoin and other major cryptocurrencies such as Solana (SOL) and Binance Coin (BNB). Analyst Min Jung from Presto Research noted that Ethereum has been one of the least favoured trades this cycle, with the ETH/BTC ratio continuously hitting new lows.
Investor sentiment has also been affected by concerns over leadership at the Ethereum Foundation and the blockchain’s increasing institutional focus through projects like Etherealize. This shift may have contributed to Ethereum’s relative underperformance.
Ethereum’s 17.8% daily decline marks its biggest single-day drop since May 2021, when the cryptocurrency plunged from $4,308 to $2,200 within a week. The asset currently remains 48% below its all-time high of $4,878, recorded in November 2021.
Market Volatility on the Rise
Ethereum’s one-day at-the-money volatility spiked from 34% to 184%, reflecting heightened market instability. The Deribit ETH DVOL index, which measures expected volatility over four weeks, jumped from 67% to 101%.
Amid the panic, traders rushed to hedge their positions, causing the put-call ratio to surge from 0.6 to over 2.5. Adding to the selling pressure, a dormant whale moved $228.6 million worth of ETH to Bitfinex before the crash, possibly triggering further downward momentum.
While Bitcoin only declined by 4.7% to $94,438, Ethereum’s steeper drop highlights its vulnerability in times of economic uncertainty. The crypto market’s fear and greed index now stands at 44, indicating a “fear” sentiment—a level that has historically presented buying opportunities for some investors.
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Economic Uncertainty and the Crypto Market
The recent cryptocurrency downturn followed Trump’s announcement of new tariffs, including 25% on imports from Canada and Mexico and 10% on China. Analysts fear these tariffs could increase inflation and complicate central banks’ plans to lower interest rates.
While financial markets had anticipated these tariffs, they were largely focused on other industry controversies. Analysts at 10x Research noted that the market underestimated the potential backlash from foreign governments, which may have intensified the sell-off.
Traditional markets also reacted negatively. Dow futures dropped by over 650 points on Monday, and European stocks followed suit, while the U.S. dollar strengthened.
What’s Next for Ethereum?
Jeff Park, Head of Alpha Strategies at Bitwise, compared the current situation to the 1985 Plaza Accord, which was designed to weaken the U.S. dollar to address trade imbalances. If similar financial policies emerge now, they could impact both crypto and traditional currencies.
For now, Ethereum’s future hinges on how traders respond to these macroeconomic shifts. If history is any indication, the current market fear could ultimately create opportunities for long-term investors.
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