Ethereum Narrowly Avoids Major Liquidation Event
Ethereum (ETH) experienced a significant price correction on Tuesday, dropping 22% in 48 hours and briefly trading near $2,000. This sharp decline brought a massive $126 million MakerDAO position within 4% of liquidation, highlighting the vulnerability of leveraged positions in the decentralized finance (DeFi) ecosystem.
The cryptocurrency managed to bounce off the $2,000 level, averting an immediate crisis. However, three large positions totaling $349 million remain at risk of liquidation if ETH’s price falls between $1,796 and $1,929.
Key points:
- A $126 million position came close to liquidation as ETH price plummeted
- Three positions worth $349 million face liquidation if ETH drops below $1,929
- $1.3 billion worth of ETH is currently liquidatable, with $427 million within 20% of the current price
The potential for cascading liquidations remains a concern, as forced sales of collateral can trigger further price declines. Trading firms often target these liquidation levels, potentially exacerbating market volatility.
ETH’s underperformance against Bitcoin in the recent bull market is notable, with the ETH/BTC ratio dropping to 0.0235, well below previous cycle highs. This trend is attributed to institutional inflows into Bitcoin ETFs and competition from emerging blockchains like Solana and Base.
As the market continues to navigate this volatile period, investors and DeFi users should remain vigilant of potential liquidation risks and their impact on the broader cryptocurrency ecosystem.
Source: DefiLlama
