- One of the first US crypto trading firms, Jump Crypto, has liquidated $377M worth of Wrapped Lido Staked $ETH (wstETH).
- Ethereum ($ETH) has been on a downward trend since July 24 and reached $2.1K yesterday, its lowest point in 2024.
- The broader crypto market followed in $ETH’s steps but is now showing signs of recovery.
QCP Group claims one reason for the current crypto market crash is aggressive selling by Jump Crypto, a US platform focused on algorithmic and leveraged trading.
Jump Crypto liquidated over $377M worth of wstETH in the last two weeks. Shortly after, $ETH’s price started to decline.
Is this a correlation or causation? Let’s see.
A Closer Look at Jump Crypto’s Role in $ETH Fall
Lookonchain notes that Jump Crypto is looking to sell $481M worth of wstETH in total, based on the amount the firm unstaked and moved to exchanges recently.
What is wstETH?
wstETH is a derivative of staked Ether (stETH), a tokenized representation of $ETH staked on the Lido protocol. Unlike stETH, which is locked up while you earn staking rewards, wstETH allows for simultaneous staking and trading.
Right after Jump Trading liquidated its first portion of wstETH, $ETH fell from $3.5K to $3.1K, losing nearly 10% of its value within 24 hours.
After a brief rebound to $3.3K, $ETH’s decline continued, amplified by global stock market sell-offs.
Yesterday, $ETH hit $2.1K, its lowest since December 2023. This represents a 37% drop from July 24, when Jum Crypto began the liquidation.
The sale could be linked to Jump Crypto’s investigation by the US Commodities and Futures Trading Commission (CFTC).
While the probe isn’t evidence of wrongdoing, and the CFTC remained silent on the reason, Jump Crypto’s President Kanav Kariya resigned just four days after it began.
Previously, Jump Crypto was involved in the SEC v Terraform Labs controversy. The SEC claimed that Jump Crypto had covertly intervened to stabilize Terra’s plummeting peg in 2021 but did not file charges against the firm.
Jump Crypto Sell-Offs Are Only Part of the Story
Although $ETH’s decline coincides with Jump Crypto’s asset liquidations, it’s unlikely to be the main reason for the sudden crypto winter.
Starting on Saturday, stock markets worldwide experienced a sharp decline. Japan’s Nikkei 225 index fell by 12% yesterday, marking its worst day since 1987. Meanwhile, the Nasdaq index dropped by 4.1%, and the S&P 500 by 2.4%.
While Nikkei 225 rebounded by 10.23% today, Nasdaq and S&P 500 remain on a downward trend with a 3.68% and 3% decline, respectively.
The crypto market followed suit: 96 out of the top 100 coins saw substantial losses. However, today, most tokens started to show signs of recovery:
The upturn results from increased buying pressure, as some traders see the dip as an opportunity for accumulating tokens at a discount.
Final Thoughts
Jump Crypto’s aggressive selling of wstETH significantly contributed to the recent crypto market crash. Fortunately, leading tokens began to stabilize, giving hope that the worst of the downturn might be over.
References
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