Ethereum Faces Major Price Drop Amid DeFi Liquidations

Ethereum, the second-largest cryptocurrency by market capitalization, has recently experienced a significant downturn, hitting a two-year low of $1,410 before slightly recovering. This decline has been attributed to increased selling pressure from short-term holders and rising liquidations in decentralized finance (DeFi) protocols.

Key Takeaways

• Ethereum's price dropped over 27% in 48 hours, reaching a low of $1,410.

• Short-term holders realized losses exceeding $500 million on Monday.

• Increased DeFi liquidations are contributing to the downward pressure on ETH.

• A critical support level is forming around $1,461, with 380,000 ETH accumulated.

Recent Price Movements

Ethereum's price has been volatile, with a sharp decline observed recently. After briefly touching $1,410, it managed to recover to around $1,510. However, the overall sentiment remains bearish, with many investors capitulating and realizing significant losses. According to on-chain data, short-term holders have been particularly active, leading to a substantial sell-off.

Impact of DeFi Liquidations

The recent downturn has been exacerbated by liquidations in the DeFi space. Notably, a major liquidation event occurred on the Sky protocol, where a whale's collateral of 53,074 ETH was liquidated, valued at approximately $74 million at the time. This incident highlights the risks associated with using ETH as collateral in DeFi lending platforms, where automatic liquidations can occur if the value of collateral falls below a certain threshold.

Support Levels and Market Outlook

Despite the bearish trend, there are signs of potential support forming around the $1,461 level, where a significant amount of ETH has been accumulated. This accumulation could act as a buffer against further declines, providing a foundation for a possible rebound if market sentiment improves. Analysts are closely monitoring the price range between $1,548 and $1,599, as a breakout in either direction could signal the next major price movement.

Technical Indicators

• Resistance Levels: The price may face resistance near $1,800, which is reinforced by a descending trendline.

• Support Levels: Key support is observed at $1,461, with significant accumulation at this level.

• Market Sentiment: The Moving Average Convergence Divergence (MACD) indicates bearish momentum, while the Relative Strength Index (RSI) suggests that ETH is currently oversold.

Conclusion

The current market conditions for Ethereum reflect a challenging environment, driven by selling pressure from short-term holders and increased liquidations in the DeFi sector. While there are potential support levels that could stabilize the price, the overall outlook remains cautious as traders await clearer signals for a reversal. Investors are advised to stay informed and consider the inherent risks associated with trading cryptocurrencies during such volatile periods.

Sources

• ETH risks a decline to $1,000 amid selling pressure from DeFi liquidations, FXStreet.

• Ethereum Price Hits 2-Year Low as Lightchain AI Presale Nears Final Stage – Press release Bitcoin News, Bitcoin.com News.

• 380,000 ETH Defends Key Support as Ethereum Dips: Details, U.Today.