Alert: ETH Price Risks Huge Sell-Off If Price Breaches This Level

Following Thursday’s market correction, strong liquidations have ensued across the broader market. The world’s second-largest crypto Ethereum (ETH) is down over 7% and trading at $1,650 levels. As predicted, the next support zone for Ethereum (ETH) is at the $1,600 level.

However, one concerning factor with the ETH price crash is the strong liquidations happening over its DeFi ecosystem. As per the data from Parsec, the liquidation volumes on Ethereum DeFi have exceeded $75 million in the last 24 hours.

Thus, the Ethereum blockchain attains a new peak for 2023, when it comes to DeFi liquidations. As per the on-chain data if the ETH price further falls under $1,480, a staggering $288 million in DeFi collateral shall be liquidated, reports popular crypto journalist Colin Wu.

Ethereum Massive Liquidation With Slowing DeFi

A popular crypto YouTuber Nicholas Merten, the host of Data Dash with over half-a-million subscribers, recently predicted a major risk of liquidation event if the ETH price falls below certain levels. According to Merten, traders who have excessively leveraged their positions with ETH as collateral and utilized decentralized finance (DeFi) protocols might find themselves compelled to liquidate their positions in the event of a decline in Ethereum prices.

Merten elaborated that a decrease in Ethereum’s price would have negative consequences for these loans. The primary scenario involves individuals depositing their ETH into DeFi protocols, temporarily surrendering it to receive a specific quantity of stablecoins—albeit less stablecoins—allowing them to potentially purchase more Ethereum for speculative purposes. Subsequently, they aim to repay the loan and retrieve their collateral, which outlines the fundamental use case in this context.

However, he added: “What happens is if it goes the other way, if Ethereum, the collateral, goes down low enough, and the debt-to-loan ratio starts to get too exorbitant here, essentially you don’t have enough collateral to back up the debt you took out, then there’s going to be a liquidation event, unless you can refinance it. Unless you can put in more [stablecoin] and pay down that loan, which many of these players do not have.”