Ether Plummets to 13-Month Low as Bitcoin Dips Below $60,000 Amid Zcash Vulnerability
By Abdus Salam
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In a startling turn of events, Ether (ETH) has crashed to a 13-month low of $1,540, sparking fears of further declines in the cryptocurrency market. The drop follows a significant sell-off in Bitcoin, which fell below the $60,000 threshold for the first time in several months, amid widespread panic triggered by a newly discovered vulnerability in the Zcash blockchain.
The unsettling news surrounding Zcash has sent shockwaves through Ethereum derivatives, with traders rapidly exiting the market and raising concerns over the stability of major altcoins. As ETH struggles to maintain a foothold above $1,600, analysts are left contemplating whether the cryptocurrency might soon dip as low as $1,400.
Cascading Liquidations Weigh on Market Confidence
Recent metrics show a stark shift in the Ether derivatives landscape, with the annualized funding rate for ETH perpetual futures turning negative. This development indicates a surge in demand for short positions, as investors flee from leveraged long positions, resulting in the liquidation of $1.28 billion in such bets over just five days. The fear among asset holders is palpable, with only 30% of ETH supply currently in profitable positions compared to the last time these assets were moved.
Zcash Vulnerability Spurs Fears of Contagion
The crux of the turmoil stems from a critical bug uncovered in Zcash, allowing for unlimited minting of ZEC in the largest zero-knowledge pool. Discovered via the Opus 4.8 AI model on May 29, the flaw has raised alarms about potential vulnerabilities in other blockchain platforms, leading to increased scrutiny and risk aversion within the cryptocurrency ecosystem.
Ethereum’s Total Value Locked (TVL) has also taken a beating, plunging to its lowest levels since February 2024. High-profile decentralized applications, including Spark and Ether.fi, have suffered significant TVL contractions, indicating a troubling trend that diminishes use-case demand for ETH in smart contracts.
As liquidity dries up, traders are seeking downside protection through ETH options, which have seen the put-to-call ratio soar to 3.7 times on Friday, signaling heightened demand for sell-side exposure. With liquidations continuing unabated and sentiment sinking, the prospect of a recovery appears increasingly remote.
Market Reactions to DeFi Hacks
April’s staggering $630 million in cryptocurrency hacks, most notably the $293 million breach of KelpDAO and a $280 million exploit of Drift Protocol, has placed additional stress on an already beleaguered market. As investor confidence wanes, fears of further hacking incidents loom large, contributing to the risk-off sentiment permeating the cryptocurrency space.
Authorities within the industry are now scrutinizing security measures across the board, with AI-driven detection giving rise to heightened awareness of potential systemic risks. The implications for Ethereum and other major players could be profound if vulnerabilities persist without adequate response.
As the cryptocurrency market grapples with these evolving challenges, traders brace for volatility, with many now speculating on whether the once-stable Ethereum could fall below the critical threshold of $1,550.
Source: Cointelegraph