A further 20% decline in Ether (ETH) could lead to up to $336 million in liquidations within the decentralized finance (DeFi) space, as noted by Kevin Rusher, the founder of a real-world asset (RWA) lending platform.
The founder highlighted that a drop to $1,857 would trigger $136 million in liquidations, while a reduction to $1,780 could result in an additional $117 million in loan liquidations, making these crucial price points to monitor.
He also indicated that the most adverse scenario would involve a 20% loss in ETH’s price, reaching approximately $1,500, which could lead to a staggering $336 million in DeFi loan liquidations, further destabilizing the market. Rusher elaborated:
“The main catalyst for this potential crisis is a single $130 million ETH-backed loan in Sky, previously known as Maker, which is close to defaulting, even as the borrower attempts to secure additional collateral. Throughout every cycle, borrowing against crypto experiences extreme volatility, resulting in cascading liquidations that precipitate asset price crashes.”
He proposed integrating RWAs, like real estate and gold, known for their price stability, into the DeFi landscape to mitigate volatility and counteract the risk of mass liquidations caused by excessive leverage.
Accumulated ETH liquidations.
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ETH Value Declines; Is More Pain Ahead?
Ether has fallen to significant lows against Bitcoin (BTC), suggesting a possible 30% dip compared to the capped supply asset, which has led some analysts to foresee a potential bottom for ETH at $1,600.
In the past week, ETH has lost over 15% of its value, consistently trading below its 200-day exponential moving average (EMA) since February.
The relative strength index (RSI) currently stands at 31, nearing oversold conditions, which may indicate a local bottom and an upcoming price rebound.
Current analysis and price action of Ethereum.
Ether’s disappointing performance has prompted some market analysts to suggest transitioning to higher-performing altcoins for better profit prospects.
“If you’re still holding ETH, now might be a good time to sell it and invest in a higher beta altcoin,” trader Alex Krüger remarked in a post on March 12.
Magazine Feature:Understanding the Pectra hard fork — Can it realign Ethereum’s trajectory?
This article is not intended as investment advice. Each investment and trading decision carries inherent risks, and readers are encouraged to conduct their own analysis before making any decisions.