Tom Lee Cites Lack of Leverage and Gold 'Vortex' for Ether's 21% Slump

Ethereum has declined 21% in the first quarter of 2026, marking its third-worst Q1 performance in history, despite continued growth in network activity and active addresses. Analysts have attributed the decline to broader market factors rather than weakening fundamentals in the Ethereum network.

Fundstrat Global Advisors' Tom Lee noted that Ethereum's price weakness is not reflective of the underlying strength of the network, as transaction volume and wallet activity remain at record levels. According to Lee, two major factors are suppressing Ethereum prices: a lack of leverage in the crypto market since the October 10th crash and the surge in precious metals, which is drawing risk appetite away from digital assets.

The price decline has also led to significant paper losses for major Ether treasury firms. BitMine Immersion Technologies, the largest corporate Ethereum holder, is sitting on $6.95 billion in unrealized losses as its holdings trade well below the average acquisition price of $3,883 per token.

Why Did This Happen?

The absence of leveraged positions in crypto markets has limited capital inflows that could otherwise support Ethereum's price. Leverage typically amplifies demand in bullish phases but can also exacerbate declines in bear markets. The October 10th market event, which sent shockwaves through the industry, caused a sharp withdrawal of leveraged capital.

At the same time, the surge in gold prices is pulling capital from riskier assets like Ethereum. Lee compared the current gold rally to the 1979-1980 gold bull market, noting recent large declines in gold prices as potential indicators of near-term market tops.

How Did Markets Respond?

BitMine continues to add to its Ethereum holdings despite the losses. The company acquired 41,788 ETH in the past week, bringing its total holdings to 4.28 million tokens or 3.55% of the total supply. The firm has stated it views the pullback as an attractive entry point given the long-term fundamentals of the asset.

Corporate treasury firms are also feeling the strain. SharpLink Gaming, the second-largest Ethereum treasury firm, is experiencing $1.09 billion in paper losses as the token trades below its average cost basis. These unrealized losses may make it harder for companies to raise funds through new share issuances, as the Market Net Asset Value (MNAV) of these firms has fallen below 1.

What Are Analysts Watching Next?

Ethereum staking continues to provide some stability for long-term holders. BitMine now has 2.897 million ETH staked, generating $188 million in annualized staking revenues. The firm is preparing to launch the Made in America Validator Network (MAVAN) in early 2026, which aims to improve the security and efficiency of staking operations.

Tom Lee has maintained a bullish view of Ethereum for the year, predicting a short-term drawdown to around $1,800 before a broader market recovery later in 2026. The Ethereum price is currently testing key support levels, and a break below $2,150 could indicate further weakness.

Investor sentiment remains cautious. The broader altcoin market is under pressure as well, with token unlocks adding to the supply-side headwinds. As Ether continues to test its bottom, market participants are closely watching for signs of stabilization and potential entry points.