As the U.S. market opens, Ether prices plummeted nearly 16% on Monday, sparking concerns of imminent $100M liquidation if prices drop by another 15%.
Nearly $100 million in ether positions are at risk if ETH’s price drops by 15%, according to analysis of on-chain data curated by DefiLlama.
The ether market refers to the global marketplace where ether, the cryptocurrency used for transactions on the Ethereum network, is bought and sold.
The ether market operates 24/7, with prices fluctuating based on supply and demand.
Key players in the ether market include exchanges such as Coinbase and Binance, which facilitate buying and selling of ether.
Additionally, decentralized finance (DeFi) platforms have emerged, allowing users to lend, borrow, and trade ether-based assets.
The ripple effects of U.S. President Donald Trump’s tariff policy were felt around the world, causing significant losses for traders in Asia. The impact was particularly harsh on lending protocols, with CoinGecko data showing a 17% decline in the category on Monday.
ETH Price Plummets Amidst Tariff Policy
Ether (ETH) prices plummeted nearly 16% on Monday, trading above $1,490, while the ‘CoinDesk 20 index fell 13%’. Market participants fear that the U.S. open could bring more pain to the market. If the U.S. open brings another 15% drop in ETH’s price, sending it below $1,274, more than $100 million in leveraged positions could face imminent liquidation.
The Ethereum (ETH) price has experienced significant fluctuations over the years.
A price drop occurs when the value of ETH decreases, often due to changes in market demand, regulatory updates, or security concerns.
According to historical data, ETH's price has dropped by as much as 90% within a short period.
This volatility is attributed to the cryptocurrency's high supply and limited adoption.
In 2020, the COVID-19 pandemic led to a significant price drop of over '50%'.
Market analysts attribute this decline to reduced investor confidence and increased selling pressure.
On-chain liquidations are potentially more impactful than those related to derivatives, as they involve spot assets being sold onto the market. In ‘MakerDAO’s case, a liquidated position is auctioned off at a cheaper rate to traders who can then sell at a relative premium, flooding the market with supply and creating more sell pressure’.
On-chain liquidation occurs when a borrower's collateral value falls below the loan amount, triggering an automatic sale of their assets to settle the debt.
This process is governed by smart contracts on blockchain platforms like MakerDAO and Compound.
In 2020, over $1 billion worth of crypto assets were liquidated on-chain, highlighting the importance of understanding this mechanism in decentralized finance (DeFi).
On-chain liquidations provide transparency and efficiency but can also lead to significant losses for borrowers if not managed properly.
ETH Price Drop Sparks Concerns
One wallet that would get liquidated at $1,418 had a number of close calls on Monday but trimmed its holdings of ether and paid back repaid some of the ‘DAI it owed’. DefiLlama’s data also shows that if the price of ETH sinks by 20%, another $36 million is at risk.
The largest single ETH position, with $147 million in collateral locked, has a strike price of $1,132. This highlights the potential risks for traders who have taken on significant leveraged positions.
