Ethereum (ETH) has shown its resilience by bouncing back above $3,000 after recent corrections. However, the token is now in a precarious position, with several levels of ETH liquidation just a few hundred dollars away.
On Tuesday, ETH was trading at around $3,070.30, remaining within a narrow range. Despite low trading volume of $13 million in 24 hours, this has been sufficient to keep ETH within its usual range. Despite precautions and automated mechanisms, liquidations are still occurring on decentralized protocols and centralized exchanges.
While decentralized protocols have support at many key price levels, there are clusters that may be impacted by even small corrections. In the past month, Ethereum has fluctuated between $2,900 and $3,300, sometimes experiencing significant short-term volatility.
One immediate and significant liquidation cluster is currently near the current price levels on the Aave protocol. Other vaults and DeFi services also hold collaterals at much lower ETH levels accumulated over the years. Currently, there are around 17,167 ETH at risk of liquidation if prices drop below the collateral level of $2,880.20.
In addition to Aave, Maker DAO is also exposed to ETH risk through its vaults, with a series of liquidation levels below $2,700. One wallet with 9,232.50 ETH is at risk of liquidation at $2,714.92. Wallets and vaults at risk often rely on DeFi Saver to try and prevent liquidations. DeFi Saver offers multiple vault controls through the Safe app to monitor and automate DeFi risk exposure.
ETH has shown its ability to easily dip into a lower range within a few days, resulting in hundreds of millions of dollars in liquidations. Recently, Lido DAO addresses were targeted and liquidated at the $3,080 range.
In centralized trading, ETH liquidations have remained relatively low, with mostly short positions being liquidated in the past day. The past week has been stressful for traders, highlighting the complexity of risk management tools.
The Ethereum ecosystem is now safer from deep liquidations thanks to the presence of Liquid Staking Tokens. These tokens often deviate from the price of ETH on exchanges and provide additional protection against liquidations.
The recent market events have not seen daily liquidations of $1 billion or more, unlike in the past. The Ethereum decentralized ecosystem is making a strong comeback in 2024, with projects holding more than $54 billion in notional value and generating $2.78 million in daily fees. Nearly $25 million in value is entering Ethereum DeFi every day.
ETH traders are putting more weight on long positions, with short liquidations decreasing on Binance in recent days. However, open interest on ETHUSDT perpetual futures is growing, reaching $2.1 billion in notional value within a day. Long positions dominate with over 77.93% of all open interest, and market takers are mostly buying ETH.
There is also interest in withdrawing and buying ETH, as indicated by the decrease in ETH reserves over the past 6-8 weeks, falling below $13 billion in value. Peak selling occurred above $4,000, and since then, there have been signs of accumulation.
Ethereum is still being used for re-staking, with the Eigen protocol holding over $15 billion in total value locked. Physical ETH tokens are still necessary for staking, as well as for vaults and collateral wallets.
However, there is a possibility that the trend could reverse as some whales may decide to sell some of their ETH. Recently, wallet watchers noticed one of the older pre-mine addresses moving ETH for the first time in nearly nine years.