Ethereum’s Aug. 4 decline could have been fueled by the liquidation of a portion of long positions in perpetual futures, the Grayscale report concluded. The crypto asset’s decline was epitomized by its over 7% drop in just three minutes on Aug. 4. Jump Crypto’s rumored offloading of more than 17,500 ether coins, as well as sales by Paradigm and Golem Network, contributed to its single-day fall of more than 20% at one point.
Grayscale Report: Liquidated Long Perpetual Positions Fueled ETH’s Black Monday Flash Crash
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ETH Drops More Than 7% in Three Minutes
According to the latest Grayscale market report, Ethereum’s plunge, which saw the number two crypto asset drop to just above $2,000, may have been due to the “outsized long positioning in perpetual futures.” These long positions had been accumulating since May 2024, when the U.S. Securities and Exchange Commission (SEC) approved issuers’ 19b-4 filings for spot Ethereum exchange-traded products (ETPs).
Although the build-up of the long positions was premised on the belief that full regulatory approval would fuel an ETH rally, this did not happen, resulting in the liquidation of a portion of long positions. The liquidations manifested in the form of an accelerated ETH decline. As explained in the report, the decline was epitomized by the crypto asset’s over seven percent drop in just three minutes on Aug. 4.
“On August 4, Ethereum’s price fell by 7.6% over just a three-minute window, and liquidations of perpetual futures totaled $340 million just on that day alone. Because the sell-off occurred during the U.S. overnight session and involved a meaningful spot price discount on Binance vs. Coinbase, the liquidations seem to have been dominated by leveraged traders in Asia,” the Grayscale report states.
Ethereum’s decline on a day described as Black Monday far exceeded that of Bitcoin ( BTC). Some commentators suggested Jump Crypto’s rumored sale of over 17,500 ETH caused this. One commentator claimed that Jump Crypto resorted to offloading its ETH holdings on an over-the-counter market because it had an urgent need to sell.
Meanwhile, the Grayscale report also acknowledges that Jump Crypto’s emergency sale may have contributed to ETH’s massive decline. The report, however, revealed that similar sales by venture capital firm Paradigm and Golem Network contributed to its single-day fall of more than 20% at one point. The combined sales by these firms totaled an estimated $1.5 billion in ether.
To support the assertion that the drop was a deviation from the norm, the Grayscale report shares data showing that ETH’s decline was 1.8 times as much as Bitcoin’s price. Typically, ETH falls 1.2 times as much as Bitcoin in drawdowns.
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