Ether (ETH) fell to a 13-month low of $1,540 on Friday, dragged down by a convergence of forces rarely seen simultaneously in a single trading session: cascading leveraged liquidations, a sharp Bitcoin retreat below $60,000, and a security shock that originated not in Ethereum itself but in the privacy-focused Zcash blockchain.

The decline places ETH approximately 67% below its all-time high from August 2025 and marks the asset's weakest price point in over a year. With derivatives positioning heavily skewed toward the downside and Ethereum's decentralized finance ecosystem absorbing significant capital outflows, traders are now assessing whether the current selloff marks a temporary reset or a deeper structural deterioration.

Leveraged Long Positions Wiped Out as Derivatives Turn Bearish

More than $1.28 billion in leveraged ETH long positions were liquidated over five days, eliminating the possibility of a relief bounce and leaving the market structurally weakened. The Ether futures annualized funding rate turned negative on Friday, a clear signal of increased demand for short positions, even as the asset traded more than two-thirds below its peak.

On the options market, the Deribit ETH put-to-call premium spiked to 3.7 times on Friday, reflecting an acute surge in demand for downside protection. The ratio had consistently indicated excess demand for sell options since the start of the week, a pattern that typically precedes further price weakness when it is sustained over multiple sessions.

Zcash Bug Spills Into Ethereum's DeFi Ecosystem

The immediate trigger for a significant portion of Friday's sell pressure came from an unexpected source. The disclosure of a critical vulnerability in Zcash's Orchard shielded pool, which had existed since May 2022 without detection, sent shockwaves through the broader crypto market. The flaw, discovered on May 29 using Anthropic's Claude Opus 4.8 AI model, could theoretically have allowed an attacker to mint an unlimited number of counterfeit ZEC tokens.

Although the vulnerability was patched through an emergency network upgrade before public disclosure, the revelation that such a flaw had evaded years of expert review alarmed investors across the entire digital asset space. The concern was not confined to Zcash: market participants began pricing in the possibility that similar undetected flaws could exist in other blockchains and smart contract systems, particularly those relying on zero-knowledge cryptography.

The fear proved especially potent for Ethereum, whose decentralized application ecosystem relies heavily on smart contract security. Ethereum's Total Value Locked fell to its lowest since February 2024, with several of the network's top protocols registering severe contractions. Spark lost 50% of its locked value, Ether.fi fell 49%, EigenCloud dropped 41%, and KernelDAO shed 39% within the session.

A Rare Historical Signal in Profitability Data

Despite the severity of the decline, on-chain data offers a more nuanced picture. Only 30% of ETH supply is currently in profit relative to the last time those coins moved, a condition that has appeared only a handful of times in the asset's history. The most recent comparable instance was the COVID market crash in March 2020, a low that preceded a 118% rally within 60 days.

Whether that historical analogue holds in the current environment depends heavily on how the market digests the ongoing accumulation of negative catalysts. Bitmine (BMNR US), the largest Ethereum treasury company, is sitting on roughly $10.5 billion in unrealized losses, holding approximately 4.5% of the entire ETH supply. That concentrated exposure introduces a potential source of additional selling pressure if sentiment continues to deteriorate.

Path Forward Remains Unclear Amid Compounding Risks

The broader cryptocurrency market has absorbed a series of shocks in rapid succession. Cryptocurrency hacks totaled $630 million in April alone, with KelpDAO's $293 million exploit and Drift Protocol's $280 million breach accounting for 82% of monthly losses across 25 affected protocols. Those incidents, spanning Ethereum, Solana, Base, BNB Chain, Sui, and PulseChain, have collectively diminished risk appetite across the sector.

For Ethereum specifically, the path to recovery appears contingent on a stabilization of the macro environment, a rebuild of confidence in smart contract security, and a reversal of the DeFi capital exodus. With over $500 million in leveraged ETH long positions liquidated in just 48 hours and no near-term catalyst yet visible, market participants are approaching the $1,500 level as the next critical support zone to watch.