What is ETH?

Ether (ETH) is the native token used by the Ethereum blockchain and network as a payment system for verifying transactions. ERC-20 is the standard for creating smart contract-enabled fungible tokens to be used in the Ethereum ecosystem.

ETH is the lifeblood of Ethereum. When you send ETH or use an Ethereum application, you'll pay a fee in ETH to use the Ethereum network. This fee is an incentive for a block producer to process and verify what you're trying to do. Validators are like the record-keepers of Ethereum—they check and prove that no one is cheating. They are randomly selected to propose a block of transactions. Validators who do this work are also rewarded with small amounts of newly-issued ETH. The work validators do, and the capital they stake, keeps Ethereum secure and free of centralized control. ETH powers Ethereum.

ETH's valuable in different ways to different people. For users of Ethereum, ETH is valuable because it lets you pay transaction fees. Others see it as a digital store of value because the creation of new ETH slows down over time. More recently, ETH has become valuable to users of financial apps on Ethereum. That's because you can use ETH as collateral for crypto loans, or as a payment system. Of course many also see it as an investment, similar to Bitcoin or other cryptocurrencies.

The Possible Reason Behind The ETH Price Drop

All Started From FTX Collapse!

During the FTX exchange crisis (12th November), the official FTX Telegram account announced that this exchange was hacked and warned users not to enter the FTX website and update any FTX application.

More than 600 million dollars have been stolen so far. FTX and FTX.USD were both affected by this hack.

After the hack news, the Tether foundation suspended the accounts of the possible hackers of this project and then blacklisted their accounts. Notably, these funds include about $4 million in Tether on the Avalanche network and over $27 million in Tether on the Solana network. CoinDesk independently verified the code used by Tether to block such addresses.

But, this mysterious looter of bankrupt crypto exchange FTX, who is likely an insider(!) was still holding $339 million of digital assets that drained from the exchange, according to crypto intelligence platform Arkham Intelligence.

The hacker acted hastily based on its behavior on the blockchain and used various decentralized exchanges to convert tokens, including UniSwap, 1inch and CowSwap, and struggled to dump coins such as MATIC, LINK and PAXG divided into smaller amounts to prevent losses from slippage.

Arkham found that the wallets associated with the exploiter hold $215 million in ETH, the native token of the Ethereum blockchain, $48 million in Maker’s stablecoin DAI, $44 million in BNB, the Binance ecosystem’s native token, $4 million in Tether’s USDT stablecoin on the Avalanche blockchain and $3.8 million of MATIC on Polygon’s Matic bridge.

After tracing the attacker’s blockchain transactions, Arkham found that they “appeared to be in panic” and “lost a large amount of their token holdings” when they moved assets across different chains to avoid getting caught. In a likely attempt to consolidate their holdings, they also converted tokens to ETH and DAI on the Ethereum network, movements that cannot be easily sanctioned by authorities.

Some $20 million in PAXG, a Paxos stablecoin linked to the price of gold, was frozen when Paxos was ordered to blacklist the accounts by U.S. authorities, preventing the holder from moving or cashing out the tokens.

“It is becoming clearer by the day that the FTX exploiter is not very sophisticated,” Miguel Morel, chief executive of Arkham Intelligence, told CoinDesk. “They've hastily tried to do whatever they can with the funds, seemingly without much of a plan.” The attacker also seemingly committed at least one amateur misstep. They flippantly tapped their verified personal account on crypto exchange Kraken to send enough TRX tokens to cover transaction fees, according to Dyma Budorin, CEO of blockchain security audit firm Hacken.

The Hacker Has Become an ETH Whale !

According to the data published by the Arkham Blockchain, after swapping $48M DAI token for ETH by hacker, this action has made him one of the ETH whales! As CertiK Alert tweeted, FTX Wallet Drainer is the 37th largest holder of ETH! \n

The hacker Dropped 10 places (as CertiK mentioned) after transferring 50,000 ETH to 0x866E on 20th November

Based on the nansen intern tweet on 19th November, the FTX hacker has become the 27th largest holder of $ETH token. 250,735.11 / $304 Million

That's enough for like one Ether Rock !

CertiK also continuing to see ETH swapped for renBTC in 0x866E Wallet currently holds ~1127 renBTC and ~19k ETH

Stolen ETH was sold by the Hacker!

The FTX Hacker started selling his ETH on 20th November. He has sold almost $20M worth of ETH tokens and as a result, within 3 hours, this token dropped by 5% and reached the price floor of $1150.

The hacker first transferred 40,000 Ethereum to a new address and then converted it to WBTC and then to renBTC using the 1inch decentralized exchange.

Ren Bridge is often used to transfer Bitcoin to other networks, and some hackers have used it before to keep their assets hidden.

Again on 21st November the Hacker has started selling ETH again from a new wallet. 10,000 Ethereum was drained in 15 minutes. He still has 185,000 Ethereum in his main wallet.

According to the on-chain data, the main wallet of this hacker still has a lot of ETH in it. Selling them can make the ETH price drops even much more!

End of the Story !

Methodology

In addition to the above facts and story, Now, I am going to perform some analysis about the situation of ETH token during November 2022. (So, the timespan for this analysis is since 1st November till today (23rd November)).

For this, Firstly, I am going to analyze ETH price during November and also compare it to some other top-rated cryptocurrencies (BTC, SOL, UNI, AAVE, ATOM, FLOW, LINK, MATIC) and also calculate the % change ratio of tokens price (1st November ~ Today). the main tables to use for this part are ethereum.core.fact_hourly_token_prices (for BTC, UNI, AAVE, LINK and MATIC), solana.core.fact_token_prices_hourly (for SOL), osmosis.core.dim_prices (for ATOM), flow.core.fact_prices (for FLOW).

Then, I am going to analyze the ETH balance of 2 FTX drainers wallet (which are 0x59abf3837fa962d6853b4cc0a19513aa031fd32b and 0x866eeecd1f248d1a0a2e0263f13594a6b8b7c01a) using ethereum.core.fact_eth_balances table and also compare the correlation with ETH price.

Then, I am going to analyze ETH swap activity within Ethereum DEXs using ethereum.core.ez_dex_swaps.

Then, I am going to analyze ETH flow to/from Centralized Exchanges (CEXs) mainly using ethereum.core.ez_eth_transfers (+ ethereum.core.dim_labels table to extract ETH wallet address of CEXs).

P.S: FTX and Alameda's Collapse mainly occurred around 7 - 8th November.

It’s been a tough few weeks for those affected by the bankruptcy of FTX and its associated companies.

Meanwhile, the founder of the company, Sam Bankman-Fried reportedly lives “under observation” in the Bahamas, although some fear he may try to flee to Dubai if given the chance. It is unclear how this position will ultimately work, given that the UAE and the US have an agreement on evidence sharing, judicial cooperation and assistance in criminal investigations and prosecutions.

It is still unclear who the hacker is, although there are rumors that the Bahamian government is behind the hack.

According to the above data, ETH token price was equal to $1583 on 1st November but its price is now (today 23rd November) $1151. So, ETH token price has experienced almost -28% drop price on today compared to the 1st November.

Based on the above and left charts, all of analysed tokens (and also almost all of other cryptocurrencies) has experienced massive price drop after 7th November (FTX and Alameda collapse day) and none of them were able to fully recover their lost value till today.

According to the left charts, with comparing tokens’ price on today vs their price on 1st November 2022, SOL token has the worst situation and lost the most of its value compared to the other cryptocurrencies. The main reason behind this high drop price on SOL is because FTX and Alameda have invested on this token more than others.

on the other hand, we can see $MATIC has the best situation among other tokens and has experienced the least lost value compared to its price on 1st November.

Also, we can see WETH situation is not very bad compared to the other assets. ETH has lost almost %27 of its value compared to the 1st November and there are other tokens such as FLOW (31.1%), ATOM (31.6%) and AAVE (31.91%) whiwch have lost more value than ETH. But, we can see BTC, UNI, LINK and also MATIC have performed better than ETH on holding their value.

The main reason behind this price drop as mentioned above can be because of sell pressure of FTX hackers with their drained ETHs and also the fear and panic of other ETH traders.

According to the above charts, as mentioned above in the Story section, FTX hackers have started their job on 12th November. they have started to sell some of their token on 20th November and we can see their estimated ETH balance over time.

On the right chart, we can see the correlation between ETH balance of hackers vs ETH token price over time since 12th November. As we see, after 20th November that hacker started to sell ETH tokens, ETH price has also lost its value over time and during this timespan, there is quite positive correlation between ETH price and ETH balance of FTX drainer wallets.

Also the below image (which is repeated again because of its importance), shows the actual correlation of ETH price vs swap activity of FTX drainer in a 15minute timespan on 20th November.

Also we can see there was almost 200k ETH left on drainer wallet on 20th November (as it is visible on above left chart and also below image) but their ETH balance is getting lower and lower over time and this can be good news for ETH because of ending of sell pressure by this drainer.

ETH Swaps

On the above data, we can see there was quite high volume of ETHs that have been swapped on DEXs during November. the net volume of swaps is -74.6M ETH which is a significant amount and is another reason behind ETH price drop during recent days.

Considering that the fear and panic of traders because of sell pressure of FTX drainers can be another cause of this massive sell amount.

Based on the above charts, the most number and also volume of ETH sales has achived on 8th, 9th and 10th November, the same date of FTX and Alameda collapse. Also in all days, we can see both number and especially volume of swaps from WETH (selling it) to other tokens is more than swaps to WETH (buying it).

Anyway, there is increasing activity of swaps to WETH (buying) during recent days and this can be good news for ETH.

And on the left chart, we can see the net swap volume is quite negative in all days especially during 8th, 9th and 10th November.

But as time goes on, this negative amount is being lower and lower (but still negative) and this can be good news for ETH.

ETH Flow on CEXs

on the above Swap data, we have seen significant sell pressure of WETH token within Decentralized Exchanges during November, So, basically, ETH should have lost more of its value if we only rely on DEXs. But, another important thing is ETH Flow on CEXs !

in this part, I am going to check the ETH flow on Centralized Exchanges during November 2022:

As we see on the above data, the situation of ETH in CEXs is better than DEXs because its net flow on CEXs during November was negative. this shows that majority of ETH tokens during November were transferred out of centralized exchanges and this can be good news because of less possibility of selling ETH in CEXs.

And on the left chart, we can see the daily inflow/outflow and net-flow of ETH token on centralized exchanges over time during November.

As we see, in majority of days (not all days) there was more outflows than inflows and this is pretty good for ETH token.

So, the reason that ETH token has not lost more of its value can be because of its good situation on CEXs compared to the DEXs.

Price

Other Possible Reasons Behind ETH and Also Other Cryptocurrencies

Totally, we can actually say there is only one reason behind price change of tokens in the cryptocurrency market. There can be several reasons behind price drop of tokens such as their project and teams status, on-chain data, inflow and outflow to CEXs, inflation and interest rate and the respond of Federal Reserve (and similar organizations) in order to control inflation, technical situation of tokens’ price charts and so many other reasons.

On below, I have brought some other more important factors to be informed about them:

Contagion of the FTX crisis to the GBTC fund and Genesis Trading Platform

The story started when the Genesis trading platform, which is a subset of the DCG company, announced the suspension of withdrawals. This led to the attention of the Grayscale Fund, which is the largest cryptocurrency fund in the world. After requests from the fund to reveal the addresses of its wallets, the fund refused to do so for what it called security reasons. In the meantime, there are rumors about Grayscale's 1 billion loan to Genesis. Among these rumors and fears, the bitcoin premium rate of this fund has reached a historical low of negative 45%.

According to reports, Genesisplatform is still seeking capital to escape bankruptcy. this platform first asked Binance exchange for 1 billion dollars investment, which was met with a negative answer from this exchange. The CEO of Binance believes that some of the activities of this platform are in conflict with the goals of this exchange. After the negative answer of the Binance, Genesis has reduced its target capital amount from 1 billion dollars to 500 million dollars, and according to news, it is looking to attract capital from Apollo Global Management. If Genesis not be able to provide its desired capital, it is possible that this platform will also declare bankruptcy, in which case the market will fall into another shock after FTX !

Inflation Retreat

For consecutive months, the rise in inflation in the United States and as a result the fear of the contractionary action of the Federal Reserve has been the main cause of the rise in inflation, but now with the decrease in inflation, we are seeing this factor diminishing. While earlier we saw the reduction of inflation in the United States of America, now we also see signs of the reduction of inflation in the Euro, especially in Germany. Meanwhile, one analyst believes that the bullish rally of the dollar index (DXY) is over.

Conclusion

• On the above analysis, I have expressed several reasons behind ETH price drop during recent days and in my opinion, the main reason is because of FTX hacked activity and their high sell pressure of drained ETH tokens from this exchange which is almost getting close to its end and this can be good news for ETH so maybe it can recover its lost price in the near future if nothing else bad happens !
• We have seen that many cryptocurrencies have lost their value after FTX collapse and the token with the highest price drop was SOL because of heavy investment of FTX on this token.
• ETH token has lost 27% of its value (compared to 1st November) and its situation is better than AAVE, ATOM, FLOW but worse than BTC, UNI and MATIC.
• The ETH balance of FTX hackers and also their selling activity has quite correlation vs ETH token price. More sells = more price drop.
• This behavior of hackers has also Instilled fear in traders and we have seen a quite high ETH selling activity during November by traders especially during FTX collapse and also the same time when hackers were selling their drained ETHs and the reason behind this behavior of traders can be fear and panic.
• The situation of ETH on CEXs is better than DEXs and we have seen more outflows from CEXs than inflows during November and this shows lower risk of ETH selling pressure within centralized exchanges.
• Totally, nothing is certain and 100% in cryptocurrency (and other financial markets), but we can kinda predict that if in the near future, the selling activity of FTX hackers (and also their ETH balance) ends and another crisis such as FTX does not happen (like Genesis platform possible bankruptcy as mentioned above) and if the inflation rate decrease and also if the technical situation of ETH price chart is good, we can be hopeful that ETH price begins to recover in the near future.

Discord: Ali3N#8546 Twitter: Alik_110 Tweet Link For This Dashboard:

External Sources:

https://www.coindesk.com/business/2022/11/12/ftx-crypto-wallets-see-mysterious-late-night-outflows-totalling-more-than-380m

https://www.coindesk.com/business/2022/11/14/ftx-hacker-panicked-still-holds-339m-in-ether-cryptos-arkham-intelligence

https://www.coindesk.com/business/2022/11/14/ftx-hack-or-inside-job-blockchain-experts-examine-clues-and-a-stupid-mistake

And Twitter accounts that their tweets were mentioned in the first part of the dashboard.

On the left chart, we can see the ETH price is currently below almost all moving average trend lines except its 7 days moving average. this can not be good situation for ETH token because the moving average acts like a resistance line for tokens’ price and it would be a little hard for ETH to pass these trend lines.

In addition, we can see the trend line of all moving averages is decreasing as time goes on.

And on the left chart, we can see the correlation between ETH price vs its swap volume (selling) on DEXs over time during November.

As we see, the main price collapse has occurred when there was high volume of swaps from ETH to other tokens (= sell pressure).