DeFi Turmoil: Over $5 Million Wiped Out In Liquidations

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.

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.

How To Get Free Crypto  

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.

Coinbase Banner  

Ether market cap at $378 billion on the 24-hour chart:

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.

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.

FreeBitcoin Banner  

Featured image from Pexels, chart from TradingView

Disclaimer: The article is provided for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

Go to Source
Author: Christian Encila

Recommended Crypto Services, Products and Strategies:

The first thing any crypto investor needs is is a reliable and secure Crypto Wallet.  Whether you’re looking for an online wallet, hardware wallet, desktop or mobile wallet, Crypto Renegade provides you with all the Best Crypto Wallets in each category.

Best Crypto Wallets Banner

When you’re ready to buy more crypto, or exchange your coins for others, Crypto Renegade’s list of the Best Crypto Exchanges has you covered.  The Crypto Exchanges recommended here offer everything from simplicity and convenience to advanced trading platforms and profit sharing. 

Best Crypto Exchanges Banner

If you want to learn more about the methods and tools that can be used to find Great Crypto Projects, then be sure to check out Crypto Renegade’s strategy for How To Find The Best Cryptocurrency.

Crypto Strategy Banner

For those people that don’t have any money to invest right now, or just want to understand the technology a bit more, you’ll definitely want to check out Crypto Renegade’s Free Crypto Strategy and start collecting Free Coins today!

Free Crypto Banner

What do you think about cryptocurrency? Do you have any questions about it? Be sure to leave a comment below.

You May Also Like

More From Author

This site uses Akismet to reduce spam. Learn how your comment data is processed.