Why is Ethereum (ETH) Dropping? Market Analysis (Feb 2, 2026)

$ETH has faced significant selling pressure over the last 72 hours, dropping below the psychological $2,500 level. As of today, ETH is trading around $2,340, marking a nearly 18% decline over the past week. Here is what's driving the move:

1. Macro Economic Turbulence: The U.S. Factor

The primary catalyst for the weekend's "flash crash" was the partial U.S. government shutdown that began on Saturday, February 1st. This created a "risk-off" environment across global markets, leading to over $2.5 billion in liquidations in the crypto space. Investors typically flee volatile assets like ETH when political uncertainty in the U.S. spikes.

2. Technical Breakdown (The Chart's Story)

Looking at your screenshot, several technical indicators confirm the bearish trend:

Death Cross/MA Alignment: The price is trading well below the MA(7), MA(25), and MA(99). This "stacked" alignment indicates that the short-term, medium-term, and long-term momentum are all pointing downward.

Support Levels Smashed: ETH failed to hold the critical support at $2,623 and $2,475. It is currently searching for a floor, with analysts eyeing $2,250 (as seen on your chart) and potentially a deeper dip toward $1,880 if the selling doesn't subside.

Order Book Imbalance: Your order book shows a 74.01% Sell vs. 25.99% Buy ratio. This heavy sell-side pressure suggests that the market is still in a "sell the bounce" mode.

3. Institutional Rotation & ETF Outflows

Following a period of hype, we are seeing a rotation of capital. Large institutional holders (whales) have been shifting funds out of ETH ETFs and toward emerging Layer 2 solutions (like the upcoming MegaETH launch on Feb 9) or stable, tokenized real-world assets (RWAs) which are gaining regulatory favor in 2026.

4. Market Sentiment: "Fear"

The rapid drop from $3,000 to $2,340 in just a few days has triggered retail panic. On-chain data shows that while retail is selling in fear, whales are beginning to accumulate at these lower levels, waiting for the U.S. political situation to stabilize.

💡 What’s Next for ETH?

Bullish Scenario: If $ETH can reclaim the $2,475 level and hold, we could see a relief rally toward $2,700.

Bearish Scenario: If the $2,250 support fails to hold today, the next major "demand zone" sits closer to $1,900.

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