The recent price drop for Ethereum has resulted from a combination of rising borrowing rates and the liquidation of large positions in the market. These factors have significantly impacted trading balances.
Rising Borrowing Rates on Aave
The decline in Ethereum's price began after borrowing rates on the Aave platform increased. Data showed that the variable borrowing rate for Wrapped Ethereum surpassed 6.5% last week. This led to higher borrowing costs, which made previous trading strategies ineffective, prompting many traders to unwind their positions.
Ethereum Position Liquidations
Market data from the previous 24 hours revealed that Ethereum experienced the highest number of liquidations among all significant digital assets, with over $177 million worth of positions closed. Long positions were hit harder than short positions, further driving down the price.
Institutional Investments Continue to Flow In
Despite the price drop, Ethereum continues to attract interest from institutional investors. For instance, on July 23, spot Ethereum exchange-traded funds saw a net inflow of $330 million, marking the seventh-largest day since their inception. This level of institutional interest highlights the asset's long-term appeal.
In summary, the recent decline in Ethereum's price was triggered by rising borrowing rates and heavy liquidations. However, institutional interest remains strong, emphasizing the asset's significance in the market.
