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Megacap cryptocurrency Ethereum (ETH -0.26%) has continued to sell off in today's session, now having given up most of its gains since the sector-driven mania following the approval of spot BitcoinETFs earlier this month.

As of 3 p.m. ET, Ethereum declined 6.1% over the past 24 hours, dropping below the $2,350 level. This move appears to be tied to a number of market-driven forces, but also some token-specific headwinds that investors are pricing in today.

Here's what's behind today's big downside move in Ethereum.

When certain investors sell a given cryptocurrency or stock, investors pay attention. Accordingly, news that the Ethereum Foundation (the nonprofit doing much of the behind-the-scenes work to keep Ethereum up and running) sold more than $1.6 million worth of the world's second-largest cryptocurrency has sent shockwaves reverberating through the market.

Recent reports show that this large sale, in which 700 Ether were sold, continues a trend of capital-raising from the Ethereum Foundation. A previous sale of 100 Ether tokens on Jan. 16 from the same wallet suggests that the ongoing development work may be more costly than initially thought, providing some downside selling pressure on this token.

Ethereum does have another upgrade on the go, with its so-called Dencun upgrade already underway as of last week. Thus, it's possible that these token sales could dry up as development activity slows, but it's a key factor in the supply/demand equation investors are digesting right now.

Additionally, concerns around capital flight from the crypto sector, evidenced by more than $2 billion of Bitcoin ETF outflows, has some concerned about the secondary impacts on Ethereum. So far, the excitement around these exchange-traded products hasn't stoked the kind of investment many initially thought would come. For future Ethereum ETFs, that's not great, and this sector-wide selling pressure will likely continue to flow through to the Ethereum ecosystem as well.

Occasionally, it's important to reflect on the cost impacts various development initiatives have on various blockchain networks and their associated tokens. Given Ethereum's aggressive upgrade schedule and top-tier talent in terms of the developers working diligently on ensuring this protocol's stability, these token sales may not be surprising. But it does appear some in the market have been caught off guard by the corresponding selling pressure and sentiment shift caused by these sales.

That said, it could also be true that these ongoing upgrades provide outsized value relative to their initial up-front costs. Crypto investors and users want to see an Ethereum network that's as low cost and efficient as possible. That's what this Dencun upgrade aims to achieve.

Additionally, some recent news around MetaMask launching an Ethereum validator staking feature could result in more locked-up Ethereum tokens, potentially offsetting some of the recent selling pressure we've seen from the Ethereum Foundation and others.

These effects likely won't offset the institutional capital flight we're seeing from the crypto sector. However, it's the longer-term supply-and-demand dynamics investors will need to consider when it comes to this top-tier crypto.

Thus, I think the jury remains out with respect to how Ethereum will perform as it continues its ongoing upgrades in the coming months. For now, sentiment has soured, but long-term investors may want to consider this dip as a potential buying opportunity, as traders look elsewhere to take on bullish positions.

Read more:

Why Ethereum Slumped More Than 6% Today - The Motley Fool