DeFi Turmoil: Over $5 Million Wiped Out In Liquidations Amid Ethereum Price Drop
20 März 2024 - 8:22AM
NEWSBTC
The decentralized finance (DeFi) ecosystem teetered on the brink of
a meltdown yesterday as cascading liquidations swept through the
market following a sharp drop in Ethereum (ETH) price. Over $5.4
million in collateralized assets were forcibly sold off in a
24-hour period, raising concerns about the stability of the DeFi
house of cards. Related Reading: AVAX Price Soars To Highest In
Nearly 2 Years, Over 80% Of Holders In Profit Ethereum, the world’s
second-largest cryptocurrency by market capitalization, bore the
brunt of the liquidations. Its price plummeted over 9% to below
$3,200, a far cry from its recent high of $4,092. This price swing
triggered a domino effect, as collateralized loans used to amplify
returns in DeFi protocols faced margin calls. Data from Parsec
paints a bleak picture, with a potential $24 million liquidation
event looming if ETH price dips further to $3,008. Volume of
transactions involving Ether across Defi protocols. Source: Parsec
On-Chain Derivatives Spark $52 Million DeFi Liquidation Blitz To
make matters worse, within the same time frame, major on-chain
derivatives have triggered liquidations totaling more than $52
million. After selling at a high of $4,100 for Ethereum, short
traders recouped their losses by repurchasing the cryptocurrency at
$3,200. The pain wasn’t shared equally, however. Panic selling by
long position holders, those betting on an ETH price increase,
resulted in a whopping $104 million in liquidations compared to
a little over $16 million for short sellers. This imbalance
could exacerbate the ETH price decline, creating a negative
feedback loop. The situation highlights the inherent risks
associated with leverage in DeFi protocols, While leverage can
magnify profits, it can also amplify losses, especially during
periods of high volatility. Ether market cap at $378 billion on the
24-hour chart: TradingView.com The bloodbath wasn’t confined to the
DeFi space. The broader crypto market experienced heightened
volatility as investors braced for the upcoming Federal Open Market
Committee (FOMC) meeting. The potential for a Federal Reserve
interest rate hike, coupled with weak inflows into Spot Bitcoin
ETFs, cast a shadow of bearish sentiment across the digital asset
landscape. Ether price down in the last 24 hours. Source:
Coingecko. Ethereum Price At A Glance Currently, Ethereum (ETH) is
experiencing a decline of nearly 10% and is currently trading at
$3,138. The 24-hour trading volume for ETH stands at
$29 million. Ethereum had a 20% retracement, making it the
second most significant decliner among the top 10 cryptocurrencies.
ETH traders maintained their sense of confidence by retaining and
mitigating their positions in anticipation of an impending period
of recovery. Related Reading: XRP Price On The Crosshair As Trading
Begins On US-Backed Exchange Based on the prevailing market
indicators, it is plausible that the price of Ethereum may evade
more drops in the foreseeable future, as the bullish sentiment
seeks to consolidate at the support level of $3,200, thereby
establishing a foundation for a subsequent phase of recuperation.
Featured image from Pexels, chart from TradingView
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