Ethereum Slips Below $2,700 as Warsh Effect Triggers Market Shock

Ethereum prices dropped sharply in late trading, sliding nearly 4% within hours and briefly breaching the critical $2,700 support level as traders reacted to rising expectations of a hawkish shift at the U.S. Federal Reserve. The sudden move has been widely labeled the “Warsh Effect,” referring to surging market odds that former Fed Governor Kevin Warsh could be nominated as the next Federal Reserve Chair  a scenario investors see as negative for risk assets, including crypto.

At the time of writing, Ethereum was hovering near the $2,720-$2,740 range after printing intraday lows close to $2,690, marking one of its fastest short-term pullbacks this month.

Ethereum Price Breakdown: Numbers Tell the Story

From a statistical standpoint, the sell-off was aggressive. Ethereum’s 24-hour trading volume jumped more than 32%, climbing above $18 billion as panic selling and leveraged liquidations accelerated. Data from derivatives markets showed over $110 million in ETH long positions liquidated within a six-hour window, with perpetual futures funding rates flipping briefly negative  a classic signal of short-term bearish sentiment.

ETH had been consolidating above $2,800 for most of the week, making the $2,700 level a widely watched technical and psychological floor. Historically, Ethereum has reacted strongly to round-number supports, with past breaks often triggering an additional 6%-10% downside move before stabilization.

The “Warsh Effect” and Why Markets Care

The core driver behind the sudden drop is macro, not crypto-native. Kevin Warsh is viewed by Wall Street as firmly hawkish, favoring tighter monetary policy, balance-sheet reduction, and less tolerance for inflation risks. Prediction markets recently priced his chances of becoming Fed Chair as high as the mid-90% range, a sharp jump that caught traders off guard.

For crypto markets, liquidity is king. Ethereum has shown a strong inverse correlation with U.S. real yields over the past year, estimated at roughly -0.62. When expectations tilt toward higher rates for longer, speculative assets tend to reprice fast  and crypto is often first to feel the heat.

On-Chain and Network Metrics Remain Stable

Despite the price volatility, Ethereum’s underlying network data shows little sign of stress. Staked ETH remains above 33 million coins, representing more than 27% of the circulating supply. Daily active addresses have held steady near 430,000, while average transaction fees remain below $3, signaling no network congestion or panic usage.

Additionally, ETH supply on centralized exchanges continues to trend lower on a monthly basis, down roughly 9% compared to the same period last year. That suggests long-term holders are not rushing to exit, even as short-term traders react to macro headlines.

Key Technical Levels Traders Are Watching

From an analytical perspective, $2,700 is now the line in the sand. A sustained daily close below this level could open downside targets around $2,550 and $2,420, based on volume profile gaps and prior consolidation zones. On the upside, Ethereum would need to reclaim $2,820 to invalidate the immediate bearish structure and signal a potential relief bounce.

The 50-day moving average currently sits near $2,760, acting as near-term resistance, while the 200-day moving average remains safely lower, suggesting the broader trend has not fully broken.

What Comes Next for Ethereum?

Short term, Ethereum’s direction is likely to remain tied to macro headlines and interest-rate expectations rather than crypto-specific developments. If Fed leadership uncertainty persists or bond yields continue rising, volatility could stay elevated. However, structurally, Ethereum’s fundamentals remain intact, with strong staking participation, declining exchange supply, and steady network usage.