If Ethereum makes this unexpected move, altcoin investors can make serious profits.
If this happens, there will be serious Ethereum (ETH) arbitrage opportunities for altcoin investors.
Despite the increase in liquidation volume in the cryptocurrency market, the second largest network in the industry faced no issues as it entered the past week before the merge update. But things could change if the price drops to $1,348. According to DeFiLIama, there is $167 million worth of stETH at risk of liquidation at $1,348. Compared to spot-based Ethereum futures, the liquidation level is almost twice as high.
Arbitrage opportunities
In the event of a liquidation, $167 million worth of tokens will be injected into the market. This in turn will put tremendous pressure on stETH, which will definitely lead to divergence from the price of spot ETH assets. Such conditions can be used for arbitrage trading.
With a spike in selling pressure, there is a possibility that the stETH price may drop well below the market price of Ethereum. To take advantage of this, investments can start buying stETH at a lower price. They can then sell their regular ETH holdings, making a profit immediately, considering that there is a high probability that stETH will return to the same level as the spot asset.
One way or another, if the price of the second largest cryptocurrency market suddenly drops to the price mentioned above, the liquidation may not occur at all. Investors and traders can always additionally finance their positions. This further reduces the liquidation price and prevents collapse.
In addition to the financial reasons that can help the market avoid stETH liquidations, spot prices can also avoid such a rapid and unexpected increase in selling pressure, given their previous performance in the market. At the time of writing, Ethereum is trading at $1,567.45. It has seen a slight correction in the last 24 hours. Meanwhile, Bitcoin price is consolidating to reach $19,000.
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