ETH slides to 13‑month low as BTC and altcoins sell off: is a move toward $1,400 on the table?
Ether’s price has broken down to levels not seen in over a year, with a combination of macro weakness in crypto, derivatives stress and fresh security fears driving the sell-off. The drop followed Bitcoin’s slip below the psychologically crucial $60,000 mark and news of a critical vulnerability in Zcash, rattling investor confidence across the entire digital asset market.
ETH hits 13‑month low amid broad market capitulation
On Friday, Ether (ETH) fell to around $1,540, its lowest point in 13 months, as the broader crypto market turned sharply bearish. The move intensified concerns that a deeper correction could be underway, particularly with Ethereum-specific indicators flashing growing pessimism.
Even though ETH is already trading about 67% below its all‑time high from August 2025, bullish conviction has been heavily eroded. In just five days, roughly $1.28 billion in leveraged long positions were wiped out, leaving many traders shell‑shocked and reluctant to re‑enter the market with size.
Derivatives flip bearish: funding turns negative
Derivatives data paint a grim short‑term picture. The annualized funding rate for Ether perpetual futures turned decisively negative on Friday. This shift signals that traders are now paying a premium to hold short positions rather than longs, reflecting a surge in demand to bet against ETH.
When funding rates remain negative for an extended period, it often means that market participants expect further downside and are willing to sustain the cost of being short. Combined with the recent wave of liquidations, this suggests that the derivatives market is being dominated by bears, with few willing to take the other side.
Options market screams demand for downside protection
The options market confirms the defensive turn in sentiment. On Deribit, the put‑to‑call premium ratio for ETH options spiked to around 3.7 on Friday, meaning the cost of put options (downside protection) vastly outweighed that of call options (upside exposure).
This elevated demand for puts has persisted since early in the week, indicating that large traders and institutions are actively hedging against further declines or speculating on more pain ahead. Historically, such skewed put‑to‑call ratios reflect an environment of low confidence, where traders see asymmetrically greater risk to the downside than opportunity to the upside.
TVL slump deepens concerns over Ethereum’s fundamentals
The negative sentiment is not just driven by price. On‑chain metrics show clear signs of weakening fundamentals in the Ethereum ecosystem. Total Value Locked (TVL) across Ethereum‑based decentralized applications has fallen to its lowest level since February 2024.
Falling TVL typically implies less capital deployed in lending protocols, decentralized exchanges, liquid staking platforms and other DeFi applications. As deposits shrink, protocol revenues tend to decline, which in turn can reduce the economic incentive to hold or use ETH as gas and collateral. This feedback loop can reinforce downward price pressure, especially when macro sentiment is already fragile.
Some of Ethereum’s largest and most closely watched protocols have seen particularly steep contractions in TVL:
– Spark: down roughly 50%
– Ether.fi: down about 49%
– EigenCloud: down around 41%
– KernelDAO: down about 39%
Such sharp drawdowns hint at a broad de‑risking by sophisticated users and liquidity providers, not just a casual retail exodus.
Zcash inflation bug sparks fears of hidden vulnerabilities
A key catalyst for the latest wave of selling came from outside Ethereum itself: a serious vulnerability discovered in Zcash. A flaw in the largest Zcash zero‑knowledge shielded pool could, in theory, allow unlimited creation of ZEC, an “infinite mint” scenario that undermines the monetary integrity of the asset.
The bug, detected on May 29 using the Opus 4.8 AI model from Anthropic, reportedly existed unnoticed since 2022. The idea that such a critical issue could lurk for so long without detection has spooked market participants across the cryptosphere.
This incident has triggered a broader fear: if a mature privacy‑focused chain like Zcash can harbor an inflation bug for years, what about other smart contract platforms and Layer‑2 networks relying on complex cryptography and zero‑knowledge proofs? With each new exploit, investors are forced to reassess the true risk profile of protocols they once considered hardened.
AI‑driven security raises the bar-and the anxiety
The use of advanced AI tools to uncover the Zcash vulnerability is a double‑edged sword. On one hand, it enhances the ecosystem’s ability to detect subtle design flaws that traditional audits might miss. On the other, it implies that the bar for protocol safety is rising quickly, and actors-both white‑hat and malicious-now wield more powerful tools.
In April alone, crypto‑related hacks and exploits totaled around $630 million across the industry. As AI‑assisted analysis becomes more widespread, it is likely that more latent issues will be brought to light. While this is ultimately positive for long‑term security, the interim period could be marked by repeated shocks as hidden vulnerabilities are dragged into the open.
Massive DeFi hacks amplify risk‑off mood
The DeFi sector is already on edge after a string of large‑scale exploits. Two incidents, in particular, set the tone:
– KelpDAO suffered an estimated $293 million hack.
– Drift Protocol was hit for around $280 million.
Together, these two incidents accounted for roughly 82% of the monthly losses across 25 different protocols. Importantly, the damage was not confined to a single ecosystem. Attacks spanned Ethereum, Solana, Base, BNB Chain, Sui and PulseChain, underscoring that no major network is entirely insulated from smart contract risk.
For Ethereum, which still hosts a significant share of DeFi activity, every major exploit-no matter the chain-feeds into a narrative of fragility. Capital leaves not just the affected protocol but DeFi as a whole, compressing TVL, discouraging risk‑taking and indirectly weighing on ETH demand.
On‑chain pain: only 30% of ETH supply in profit
On‑chain data illustrate just how widespread the losses have become. At present, only about 30% of the total ETH supply is in profit compared to the last time those coins moved on‑chain. In other words, roughly 70% of ETH holders are sitting on unrealized losses.
This configuration has been rare in Ethereum’s history. A comparable setup appeared during the March 2020 COVID‑induced crash and, earlier, in mid‑December 2019. Interestingly, both periods later coincided with major upside moves: after December 2019, ETH went on to rally by around 118% within 60 days.
From a contrarian or long‑term investor perspective, extreme profitability compression can be interpreted as a strong buy signal-an indication that most of the “weak hands” have either sold or are under water, reducing near‑term selling pressure. However, such signals do not provide precise timing and can coexist with further short‑term downside.
Leveraged longs flushed out, no clear relief rally yet
Recent derivatives liquidations have been particularly brutal. More than $500 million in ETH long positions were liquidated in just 48 hours, effectively cleansing the market of a large portion of overleveraged bullish bets.
Normally, such a wipeout can pave the way for a relief rally as selling pressure abates and shorts become crowded. Yet, so far, there are few signs of a sustainable bounce. Spot demand remains tepid, and the negative funding rates suggest that short interest is still high.
Compounding the pressure, the largest known Ethereum treasury firm, Bitmine (BMNR US), is reportedly sitting on an unprecedented unrealized loss of about $10.5 billion. The company holds approximately 4.5% of the entire ETH supply-a concentration that makes some traders nervous about potential large‑scale de‑risking, even if no such move has been signaled publicly.
Could ETH really slide toward $1,400?
The looming question for traders is whether ETH’s current level around $1,500 can hold, or if further capitulation toward $1,400-or even lower-is likely.
Several factors support the bearish case:
1. Weak derivatives structure: Negative funding and elevated put premiums show that the market is positioned for more downside, not a reversal.
2. Falling TVL and DeFi headwinds: Capital outflows from major Ethereum DApps reduce protocol activity, revenue and the organic demand for ETH as gas and collateral.
3. Security overhang: The Zcash bug and recent large‑scale hacks keep risk aversion high. Traders may demand a higher risk premium, reflected in lower asset prices.
4. Macro backdrop: Bitcoin’s struggle to reclaim levels above $60,000 puts pressure on altcoins, especially those like ETH that have historically shown high beta to BTC moves.
However, there are also arguments for a potential medium‑term bottom forming:
1. Extreme on‑chain pain: Only 30% of supply in profit has historically aligned with attractive long‑term entry zones.
2. Deleveraging reset: With more than a billion dollars in leveraged longs already liquidated, some of the most aggressive speculative froth has been cleared.
3. Structural demand drivers: Despite cyclical weakness, Ethereum remains the base layer for a significant part of DeFi, NFTs, and Layer‑2 rollups. Fee markets, staking yields and institutional experimentation with tokenization continue to build a foundation for eventual recovery.
The coexistence of these opposing forces makes a grind lower toward $1,400 plausible before a durable bottom is established. Sharp intraday wicks, driven by short squeezes or sudden bursts of dip‑buying, are also likely in such a volatile setup.
What traders and investors are watching next
Market participants will be closely monitoring several key indicators in the coming days and weeks:
– Funding rates and open interest: A sustained return of funding to neutral or positive territory, alongside rising open interest, could signal a healthier, more balanced derivatives market.
– Put‑to‑call skew: If demand for downside protection cools and call activity rises, it may indicate that traders see less tail risk to the downside.
– TVL stabilization: Signs of TVL flattening or recovering on major Ethereum protocols would suggest that DeFi users are regaining confidence.
– Security disclosures: Additional revelations of vulnerabilities could prolong the risk‑off phase, while successful patches and audits may gradually restore trust.
– Bitcoin’s price action: As long as BTC remains under pressure, ETH is likely to struggle. A solid BTC rebound could alleviate some of the systemic selling.
Long‑term versus short‑term views on ETH
In the short term, sentiment is clearly tilted toward caution, and the technical picture does not yet show a convincing reversal. Traders focused on daily or weekly time frames may continue to lean bearish or neutral until ETH reclaims key resistance levels with strong volume.
Longer‑horizon investors, however, may view current prices as part of a broader accumulation zone, recognizing that previous episodes of extreme stress and on‑chain losses have historically preceded powerful multi‑month uptrends. The main question becomes one of time preference and risk tolerance: how long are they willing to stomach potential further drawdowns in exchange for possible outsized upside over the next cycle?
Bottom line
Ethereum finds itself at a critical juncture. Price has broken to a 13‑month low, derivatives markets are skewed toward shorts, DeFi TVL is shrinking and a high‑profile Zcash bug has reignited fears about hidden protocol risks. At the same time, on‑chain signals suggest that the majority of holders are already under water, a condition that has previously marked fertile ground for long‑term accumulation.
Whether ETH revisits $1,400-or even dips below it-will likely depend on how quickly confidence can be rebuilt across DeFi, how markets digest ongoing security revelations and whether Bitcoin can stabilize above key psychological levels. Until then, volatility and elevated uncertainty are likely to remain the norm.