Ethereum's 21% Plunge Tied to Leverage Crunch and Gold Surge
Fundstrat research partner Tom Lee recently explained that Ethereum's 21% drop in early 2026 isn't due to deteriorating fundamentals, but rather a lack of leveraged capital and shifting investor interest toward precious metals. He argues this market correction presents a compelling buying opportunity.
According to CoinGlass data, this could become Ethereum's third-worst Q1 performance on record. However, Lee highlights improving on-chain metrics showing Ethereum's ecosystem continues expanding, with daily transactions hitting a record 2.8 million on January 15 and active addresses peaking at 1 million daily.
On-Chain Metrics Tell Different Story
Lee notes that during the 2018 and 2022 crypto bear markets, Ethereum's transaction activity and wallet growth contracted significantly. This downturn shows the opposite pattern, indicating the price weakness stems from temporary market dynamics rather than underlying weakness.
- Leveraged trading volume remains depressed since October's crash
- Strong precious metals prices create capital diversion 'vortex'
While short-term price pressure continues, Ethereum's growing adoption and network activity suggest solid foundations for future recovery.