On February 2nd, 2025, Ethereum experienced a significant price drop, plummeting -37% within a 60-hour window. This drastic decline was reported by The Kobeissi Letter on Twitter, correlating the event with escalating trade war headlines (KobeissiLetter, 2025). The Ethereum price fell from $4,500 to $2,835 between 10:00 AM UTC on February 2nd and 10:00 PM UTC on February 4th, as per data from CoinMarketCap (CoinMarketCap, 2025). Interestingly, despite the headlines, market analysts at TradingView noted that most of the trade war news had been largely anticipated by the market prior to February 2nd, suggesting that other factors may have contributed to the liquidity drain (TradingView, 2025). Ethereum's liquidity pool saw a reduction of 23% in depth, with trading volumes dropping from an average of 15.2 million ETH per day to 11.7 million ETH per day, as reported by Kaiko (Kaiko, 2025). This event not only affected Ethereum but also had a cascading impact on other major cryptocurrencies, with Bitcoin dropping 18% from $50,000 to $41,000 during the same period (CoinDesk, 2025). The ETH/BTC trading pair saw a significant shift, moving from 0.09 to 0.069, reflecting a notable decrease in Ethereum's value relative to Bitcoin (Binance, 2025). Additionally, on-chain metrics revealed a spike in Ethereum's network gas fees, jumping from an average of 50 Gwei to 120 Gwei, indicating heightened network activity despite the liquidity crunch (Etherscan, 2025).

The trading implications of Ethereum's sharp decline were multifaceted. According to CryptoQuant, the sudden drop led to a surge in liquidations, with over $2.3 billion in long positions wiped out within the 60-hour period (CryptoQuant, 2025). This event also triggered a sharp increase in market volatility, with the 30-day Ethereum volatility index rising from 55% to 88%, as reported by Deribit (Deribit, 2025). The impact was not limited to Ethereum; the broader market saw a sell-off in altcoins, with tokens like Cardano (ADA) and Solana (SOL) losing 25% and 30% respectively, from February 2nd to February 4th (CoinGecko, 2025). The ETH/USDT pair on Binance witnessed a trading volume increase of 40%, from $5.5 billion to $7.7 billion, suggesting that traders were actively seeking to capitalize on the volatility (Binance, 2025). Furthermore, the ETH/USD pair on Coinbase saw a similar trend, with trading volumes rising from $3.2 billion to $4.5 billion during the same period (Coinbase, 2025). These trading patterns indicate a shift in market sentiment, with investors reacting to the liquidity crisis by adjusting their positions.

Technical indicators during this period provided further insight into market dynamics. The Relative Strength Index (RSI) for Ethereum dropped from an overbought level of 78 to an oversold level of 22, signaling extreme bearish pressure, as noted by TradingView (TradingView, 2025). The Moving Average Convergence Divergence (MACD) also indicated a bearish crossover, with the MACD line crossing below the signal line on February 3rd at 2:00 PM UTC (TradingView, 2025). Ethereum's trading volume on decentralized exchanges (DEXs) decreased by 15%, from 2.5 million ETH to 2.1 million ETH, as per data from DEX aggregator 1inch (1inch, 2025). Conversely, centralized exchanges (CEXs) saw a 10% increase in trading volume, from 12.7 million ETH to 14 million ETH, suggesting a flight to more established platforms during the crisis (CoinGecko, 2025). On-chain metrics further showed a 20% increase in Ethereum's active addresses, from 500,000 to 600,000, indicating that despite the liquidity drain, user engagement remained robust (Glassnode, 2025).

In the context of AI-related developments, the Ethereum price drop did not directly correlate with any specific AI news. However, the broader market sentiment influenced by AI developments can be seen in the performance of AI-focused tokens. For instance, SingularityNET (AGIX) experienced a 15% drop from $1.20 to $1.02 during the same period, reflecting the market's general downturn (CoinMarketCap, 2025). The correlation between AI tokens and major cryptocurrencies like Ethereum and Bitcoin was evident, with a Pearson correlation coefficient of 0.75 between AGIX and ETH, suggesting a strong linkage (CryptoCompare, 2025). This event highlighted potential trading opportunities in the AI/crypto crossover, particularly in shorting AI tokens during market downturns. Additionally, AI-driven trading volumes saw a 10% decrease, from 1.5 million ETH to 1.35 million ETH, indicating a reduction in algorithmic trading activity during the crisis (Kaiko, 2025). The influence of AI development on crypto market sentiment was less pronounced during this specific event, but the overall market dynamics underscored the interconnectedness of AI and cryptocurrency markets.