TLDR
- On Monday, Ethereum's price took a steep dive of roughly 10%, hitting $1,820 — a level not seen since December 2023.
- A colossal DeFi loan, amounting to $74 million and underpinned by $130 million in Ethereum, is teetering on the brink of liquidation.
- Currently, only half of Ethereum's holders are seeing a profit, a significant decline from the 82% recorded at the beginning of 2023.
- Last week witnessed the withdrawal of $1.8 billion worth of Ethereum from exchanges, representing the largest departure since December 2022.
- Should Ethereum's price continue to slide, it might test supports at $1,700 or even as low as $1,300.
Ethereum has encountered significant market pressure lately. The world's second-largest cryptocurrency took a nearly 10% nosedive on Monday, plummeting to $1,820, marking its lowest since December 2023.
ETH Price
The rapid downturn has sent ripples through the DeFi landscape. Ethereum plays a pivotal role as collateral for numerous loans on decentralized finance platforms.
A particularly pressing issue involves a $74 million loan on the Sky platform. (previously branded as Maker). This loan rests on the backing of 65,680 Ethereum tokens, valued close to $130 million earlier in the week.
The loan's trigger for liquidation sits just above the $1,900 mark. When Ethereum tumbled beneath this line, it endangered the entire borrowing with liquidation.
According to blockchain insights, the borrower responded swiftly. They extracted 2,000 Ethereum (around $4 million) from Bitfinex and bolstered their collateral.
Rather than halting there, as the price continued to fall, the borrower pulled $1.6 million in USDT from Binance, converting it into DAI to trim their debt to $73.1 million.
Despite these maneuvers, risks persist. The latest liquidation threshold stands at $1,836, still perilously close to Ethereum's recent trading figure of roughly $1,870.
This is not the sole loan under threat. DefiLlama's reports indicate $13.6 million in loans could face liquidation if Ethereum dips to $1,857. An additional $117 million might be liquidated at $1,780.
If we zoom out, the broader view gets even scarier. A further 20% dip in Ethereum could usher in liquidations on $366 million of debt.
These liquidations could potentially spark a vicious cycle. When loans get liquidated, the resulting collateral sell-off ramps up selling pressures on Ethereum's value.
Market analysis shows a swing to bearish sentiment among investors. Glassnode reports that only 50% of Ethereum investors are currently in profit, a stark contrast to the 82% seen earlier in the year.
Technical Analysis
Technical charts are casting a pessimistic outlook. Since January 25, Ethereum has been trading below the Ichimoku Cloud, hinting that the downward trend might persist.
Some experts point out $1,700 as a key support level. If it fails, they warn there could be 'catastrophic liquidations' that might drag prices further down to even $1,300.
Nevertheless, it's not all gloom. Last week, $1.8 billion worth of Ethereum moved out of exchanges and into private wallets, the largest such movement since December 2022.
Such trends usually suggest plans to hold for the long-term rather than preparing to sell, possibly indicating that some investors view current prices as an attractive buy.
If demand ramps up, some optimistic voices in the market foresee Ethereum could climb back up to $4,045, marking a 120% rise from its current levels. However, any such resurgence is unlikely in the short term with the market in its current bearish phase.
