If the value of Ether (ETH) experiences an additional 20% decline, the resulting drop could trigger up to $336 million in liquidations within the decentralized finance (DeFi) space, as noted by the founder of a real-world asset (RWA) lending platform.
The executive cautioned that if the price falls to $1,857, it could lead to $136 million in liquidations, while a decrease to $1,780 might provoke an extra $117 million in loan liquidations, making these critical price points to monitor.
In the worst-case scenario, a drop of 20% to approximately $1,500 could result in $336 million in DeFi loans being liquidated, potentially causing market upheaval. The executive mentioned in a statement:
“The primary driver of this crisis is a $130 million ETH-backed loan in Sky, previously known as Maker, which is on the brink of collapse even as the borrower tries to add more collateral. Every cycle, crypto-backed loans face severe volatility, often leading to cascading liquidations that depress asset prices.”
The executive advocated for the incorporation of RWAs, like real estate and gold, into the DeFi ecosystem. These assets are characterized by more stable values, which could help mitigate volatility and prevent cascading liquidations from excessive leverage.
Total ETH liquidations. Source: CoinGlass
Related: Three reasons why Ethereum might surpass its competitors after hitting 17-month lows
ETH price declines; tougher times ahead?
Ether’s value has plummeted to its lowest levels in years against Bitcoin (BTC), suggesting a potential further drop of 30% against this capped supply asset, leading some analysts to forecast a possible bottom at $1,600 for ETH.
In the past week, ETH has fallen over 15% and has been trading significantly below its 200-day exponential moving average (EMA) since February.
The relative strength index (RSI) currently sits at 31, nearing oversold territory, which could indicate a local bottom and signal an approaching price reversal.
Current Ethereum price action and analysis. Source: TradingView
Ether’s lackluster performance has led some market analysts to recommend shifting funds into more promising altcoins to enhance profit potential.
“If you’re still holding onto ETH, now might be a good time to sell it and invest in a higher beta altcoin,” trader Alex Krüger remarked in a recent post.
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This article is not intended to provide investment advice or recommendations. Every investment and trading decision carries risk, and readers should perform their own research before proceeding.