DeFi protocols are once again facing liquidations as Ethereum (ETH) dipped to a lower range under $1,900.
Maker is one of the major venues for liquidations, with $229M in ETH held in two major loans.
DeFi protocols once again face liquidations, as Ethereum (ETH) dipped under $1,900. The latest market downturn pushed ETH as low as $1,807.77, threatening the liquidation prices of large positions.
One of the whales has a liquidation price of $1,787.86, based on a 171% collateral ratio. So far, the whale has loaned over $68M in DAI, locking in higher ETH prices. While the whale may still retain the DAI and other assets, the seized ETH may create selling pressure.
In total, the two biggest whales on Sky Protocol (Maker) may be liquidated for over $229M. The second whale has a little more leeway, with a liquidation price of $1,701.54, with a debt of over $74M in DAI and 153% collateral.
The potential DeFi liquidations follow a day of over $217M in total liquidated from all crypto markets, with over $63M in ETH liquidations. Long liquidations are happening in real time, with one whale’s long position for $12.55M liquidated within minutes. ETH saw predominantly long liquidations, while traders cautiously decreased exposure. Open interest fell from $9.9B to $9.38B, after the new series of long liquidations.
Additionally, ETH faces pressure from spot selling. Another whale sent 6,131 ETH to Binance, for a potential sell price of over $10M.
On-chain liquidations on Aave pressure ETH
The previous month saw more than $258M in liquidations for Aave, the current leader in on-chain lending. For that same period, Sky Protocol saw just $7.7M in liquidations. The current whale positions may bring another wave coming from Maker, further worsening the Ethereum sentiment.
See also
Ethereum whales on MakerDAO face $238M liquidation risk as ETH nears critical level
All DeFi protocols carry risk at different price levels. The current threat of liquidations has shifted to Sky Protocol, but Aave also carries risky loans at just under $1,700 per ETH.
Ethereum (ETH) on-chain liquidations mark the current levels down to $1,700, with another big set of loans at around $1,200 per ETH. | Source: DeFi Llama
The total amount of on-chain ETH to be liquidated is around $1.2B. However, the biggest risk is accrued at levels from $1,699 to $1,800. The next big wave of liquidations marks a support level just under $1,200 per ETH.
The on-chain loans signal the confidence in ETH holding certain support levels. In the case of liquidations, ETH may change hands and accrue into whale wallets. However, an ETH rally has been delayed, and the value of those holdings is still questioned.
On-chain lending is a way to tap the value of ETH while betting on bullish developments. A price crash means the borrowers will be left with idle stablecoins, but not immediately capable of rebuying ETH at a lower price.
ETH still driven by risk-takers
Despite the short-term bearish sentiment, ETH is still driven by risk-takers. Long positions get rebuilt at certain levels, hoping for a rebound. ETH is at 0.022 BTC, breaking down below all support levels, but still being traded as an asymmetric bet with the hope of a breakout.
ETH sentiment remains mostly bearish for now, with crowd sentiment neutral and smart money slightly more bearish.
Based on the recent market behavior of ETH, the price is expected to drop at least another 20% until establishing a new support level. In the meantime, open interest may fluctuate, but lending protocols do not have significant loans accrued all the way to $1,200.
See also
Ethereum (ETH) drops under $2,000 again, whales rush to buy the dip
The potential of ETH is also closely watched due to the relatively slow usage of the network. The fee for regular transactions has fallen to $0.02 due to low usage as the network is mostly used for transfers of ETH and stablecoins USDT and USDC.
Ethereum still produces under $100K in fees, as validators mostly rely on the block reward for their passive income. Despite the low fees, Ethereum is lagging in terms of DEX activity, meme tokens and other use cases. Lending remains the biggest economic activity, which was supported by a relatively stable ETH price. The current market drawdown continues to unravel the DeFi sector for Ethereum, as other protocols aim to take the same niche.
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