Ethereum is in a precarious position as lenders could face massive liquidations worth nearly $500 million. According to analysts, Ethereum’s drop to $1,150 could spell disaster in the DeFi market. Here’s how…
The DeFi market is locked on the Ethereum chart, $1,150 is critical
According to blockchain expert Colin Wu and on-chain data from Parsec Finance, the price of ETH has reached dangerous values and is in real trouble. Ethereum’s DeFi market is in jeopardy, as it could be catastrophic. The problem is in the number of liquidations that will appear in the market if ETH drops to or below $1,150. According to the data, more than $500 million of on-chain collateral and close to $21,600 of $300 million of on-chain collateral will evaporate.
Massive liquidation will accelerate further market decline and a massive outflow of funds from dApps. The strong decline in the use of decentralized applications will reduce the revenue of the network.
Previously, various market and on-chain monitoring services reported more than $700 million in liquidations that resulted as an error on the API side of the centralized exchange. But with more than $500 million in actual liquidation, the pressure on the asset will increase significantly.
The market bleeds after inflation data
The main driving force of sales in the cryptocurrency market is unexpected inflation data. The heavy devaluation of the US dollar has caused a rally of commodities such as gold, which added more than 3% to its value in 24 hours.
Further risks emerged on Ethereum after price instability in the stETH-ETH pair caused by massive sell-offs and lack of liquidity. The sale was driven by the falling profitability of the ETH 2.0 staking contract, the testnet reorganization, and early depositors taking profits.
Ethereum bleeds despite prospects around merge
Leading altcoin project bleeds despite the upcoming merger. Recently, Ethereum developer Tim Beiko announced that the transition to PoS will take place between August and November. As
Kriptokoin.com, one of the threats surrounding Ethereum is its staked variant Lido (stETH). Lido, with its liquid staking feature, allows users to initially lock up ETH to get the corresponding amount of stETH. stETH, which was exchanged with Ethereum at a ratio of 1:1, is later reused in DeFi. However, each stETH is now used for 1 ETH after the merge.
The breaking of this mechanism started when Alameda Capital, one of the largest stETH investors, sold all its shares. We covered the details in this article. Thursday’s sale totaled a staggering $1.5 billion. As a result, DeFi platform Celsius is in a precarious situation with loads of funds currently locked in stETH. The continued depeg poses a threat to the platform as it can lead to mass payments. This opens up another crisis in the crypto ecosystem.
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