[DigitalToday reporter Jinju Hong] Ethereum (ETH) fell nearly 5 percent in a single day, triggering large-scale liquidations of investors who had bet on a rise.

Cointelegraph reported on June 23 that the sharp drop in ether’s price liquidated about $170 million in leveraged long positions. Most of the gains built up over the past 12 days have disappeared, and investor sentiment has also weakened again.

The decline is seen as driven by selling pressure spreading across altcoins as bitcoin struggles to defend $62,000, a key support level. Ether has fallen about 20 percent over the past 30 days, a steeper drop than the 17 percent decline in the overall cryptocurrency market capitalisation over the same period.

The market analysed that uncertainty over peace talks between the United States and Iran, and weaker appetite for risk assets due to rising costs for artificial intelligence infrastructure investment, are weighing on sentiment.

Bearish signals also emerged in the derivatives market. The annualised funding rate for ether perpetual futures at one point turned sharply negative. That implies a structure in which short-position holders pay costs, showing that participants’ confidence in a bullish market has weakened significantly. The funding rate has recovered to about 3 percent, but the market sees sentiment as still subdued given ether’s recent price moves.

On-chain indicators were also cited as a burden. As the decentralised application (DApp) market slump continued, several projects halted operations and total value locked (TVL) fell about 23 percent over the past three months.

Still, Ethereum has maintained $38 billion in DeFi deposits, accounting for about 53 percent of the overall market. On an ecosystem basis including layer-2 networks, it holds about 43 percent of decentralised exchange (DEX) trading volume.

Institutional flows also weighed. U.S.-listed ether spot ETFs have recorded net outflows for six straight weeks. About $910 million has left since mid-May, cutting total ETF net assets to $9.4 billion. The market sees the steady pattern of net outflows, rather than the size of outflows itself, as damaging sentiment.

News of restructuring at the Ethereum Foundation also acted as a negative factor. The Ethereum Foundation said it recently cut its budget by about 40 percent and reduced headcount by 20 percent. The market interpreted the move as a push for cost efficiency, but assessed it as having a negative short-term impact on sentiment.

Another factor cited was unrealised losses of about $9.3 billion on ethereum holdings at listed company Bitmine. Bitmine continues to increase its ethereum holdings, but an analysis says large mark-to-market losses could dampen institutional investors’ appetite to buy.

Still, the market has also raised the view that long-term growth drivers have not been completely damaged. The industry expects the planned 'Glamsterdam' protocol upgrade to reduce centralisation concerns by separating block production functions and to improve network efficiency and security through parallel transaction processing.

In the short term, ether’s weakness is standing out as negative factors pile up, including large-scale long liquidations, spot ETF outflows and foundation restructuring. Still, assessments say a rebound remains possible if demand recovers, given its still-dominant share in DeFi and the decentralised trading ecosystem.