Ethereum (ETH) has experienced a sharp decline, hitting a 13-month low of $1,540 as a critical vulnerability in Zcash emerged, coinciding with Bitcoin’s fall below $60,000. This downturn has raised alarms among traders regarding a potential deeper correction in ETH’s price.
Market Dynamics and Liquidations
The recent market activity has flipped Ether derivatives metrics to a heavily bearish stance, with cascading liquidations preventing any relief bounce. Over the past five days, approximately $1.28 billion in leveraged long positions were liquidated, indicating a significant shift in market sentiment.
Impact of Zcash Vulnerability
A critical bug discovered in the Zcash blockchain, which allows for unlimited ZEC minting, has triggered widespread fears of contagion within the cryptocurrency ecosystem. This vulnerability was identified using the Opus 4.8 AI model from Anthropic on May 29, 2026. The existence of this bug since 2022 without detection has led traders to speculate about potential risks across other blockchains and smart contracts.
Decline in Ethereum’s Total Value Locked
Ethereum’s Total Value Locked (TVL) has dropped to its lowest level since February 2024, negatively impacting trader sentiment. The contraction in TVL is particularly pronounced among major decentralized applications (DApps), with significant declines reported by Spark (-50%), Ether.fi (-49%), EigenCloud (-41%), and KernelDAO (-39%). This reduction in deposits within DApps diminishes ecosystem revenue and subsequently lowers demand for ETH in smart contracts.
Investor Sentiment and Future Outlook
As of now, only 30% of the ETH supply is profitable compared to when those coins were last moved, a scenario that has historically indicated potential buy signals. However, with over $500 million in leveraged ETH long positions liquidated in just 48 hours and the largest Ethereum treasury firm, Bitmine, facing an unprecedented $10.5 billion unrealized loss, investor confidence is waning. The combination of multiple hacks across the decentralized finance (DeFi) sector and the Zcash bug has left the market in a precarious position, with ETH potentially sliding further below $1,550.
This article was produced by NeonPulse.today using human and AI-assisted editorial processes, based on publicly available information. Content may be edited for clarity and style.
