Key Insights:
- A MakerDAO position valued at $126 million was just $80 away from liquidation on Tuesday.
- Three positions with a total worth of $349 million are queued for liquidation at ETH price points between $1,796 and $1,929.
- Over the past 48 hours, ETH has reversed gains from a recent rally, dropping by 22%, now trading at $2,080.
An Ethereum (ETH) position exceeding $126 million came alarmingly close to liquidation amid a recent downturn in cryptocurrency prices. ETH has retraced all gains from a Sunday surge, losing 22% of its value in just 48 hours, currently valued at $2,080.
The danger was averted when ETH bounced back around $2,000, stabilizing vulnerable positions within the decentralized finance (DeFi) ecosystem on MakerDAO.
Liquidation thresholds have been identified at $1,929 for the first warning level, with additional positions to be liquidated at $1,844 and $1,796. Collectively, these positions amount to $349 million.
Traders often aim for liquidation levels as they signify potential profitable areas. When liquidation occurs on MakerDAO, the ETH collateral is sold or auctioned, channeling fees back to the protocol. The ETH is typically acquired at discounted rates before being sold in broader markets, potentially intensifying price drops.
ETH Liquidation Levels (TradingView)
ETH Liquidation Levels (TradingView)
Moreover, liquidations within DeFi can significantly affect the market as they involve immediate asset transactions rather than derivatives, which typically have heightened liquidity levels due to their leverage.
For traders, targeting these liquidation levels can create short-term volatility, possibly leading to a cascade where one liquidation results in others.
Once the cascade ends and buyers absorb the new supply, prices generally rebound, which may entice previously liquidated traders to re-enter the market and repurchase their positions.
According to data from DefiLlama, there’s approximately $1.3 billion in liquidatable ether, of which $427 million is currently within 20% of ETH’s price.
The recent performance of ETH has lagged behind Bitcoin (BTC), which has experienced a more robust bull market drawing institutional interest towards Bitcoin ETFs and facing competition from rival blockchains like Solana and Base.
