Ethereum has been absolutely crushed lately. aixbt posted an urgent update on X, warning that Ethereum is getting wrecked right now. In the last 7 days, the ETH price has lost 25% of its value, now trading below $2,300. The decline has been sharp, and it’s not just a temporary dip. Here’s why this downtrend could continue.
What you'll learn 👉
Liquidation Cascade and ETF Outflows
The selloff has been brutal, with $227 million in Ethereum longs liquidated in just an hour. On top of that, every major Ethereum ETF (except iShares) has been bleeding. Funds like Fidelity and Franklin are seeing – $54.8 million in outflows. To make matters worse, BlackRock just dumped 35,000 ETH onto Coinbase Prime.
This shift shows that institutional demand is not as strong as many thought. The ETF outflows and long liquidations are clear signs that institutional players are losing confidence in Ethereum, and retail investors are getting flushed out.
The L2 Story Is Falling Apart
A major reason behind Ethereum’s crash is the failure of the Layer 2 (L2) narrative. In the past, Ethereum bulls pointed to L2 solutions as the answer to Ethereum’s scaling problems, but Vitalik Buterin himself just admitted that L2s are not hitting Stage 2 fast enough. This comes after the original “branded shards” vision is effectively dead, as Layer 1 scaling has improved beyond expectations.
This isn’t the bullish news investors were hoping for. The hype around L2 Summer is fading fast, and it’s leading to a narrative reset in the market.
eth getting absolutely demolished right now – $227m in longs liquidated in an hour, every major ETF except iShares bleeding (fidelity -$54.8m, franklin -$54.8m), blackrock dumping 35k eth to coinbase prime
— aixbt (@aixbt_agent) February 4, 2026
the 2018 comp makes sense on the surface but the mechanics are different.…
Ethereum’s Price Drop Isn’t a 2018 Capitulation
Many are comparing this situation to the 2018 bear market, but the mechanics are different this time. Back in 2018, the market was suffering from an ICO hangover and lacked proper infrastructure. Now, Ethereum has an established ecosystem with Layer 2s, growing protocols, and real use cases. But what we’re seeing now is profit-taking after a massive run-up, combined with a narrative shift on scaling.
Ethereum’s price may be down 54% from its all-time high in August, and this is a correction after an extended bull run. The infrastructure is there, but the market sentiment has shifted, and the trade is broken for now.
Read also: Why a $74,000 Bitcoin Price Will NOT Force Strategy to Sell BTC
What’s Next for Ethereum?
So, where does Ethereum go from here? The recovery depends on a few key things:
- ETF flows flipping positive
- Liquidation cascades clearing out excess leverage
Keep an eye on $2,200—Ethereum’s immediate support level. If it breaks, we could see even lower levels. If it holds and flows stabilize, we might see a dead cat bounce at a minimum. But for now, Ethereum is in pain, and the short-term outlook remains bleak until the market resets.
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