Ethereum: This Disaster Scenario Worries Experts

Ethereum is going through a critical period, and a 20% drop could trigger $336 million in liquidations on the DeFi market. With key levels to watch and increased volatility, investors must prepare. Risk analysis, adaptation strategies, and solutions to protect one’s crypto portfolio against this threat.

Ethereum could lose 20% of its value and trigger a real tidal wave

Massive liquidations are often synonymous with high volatility and a snowball effect on the market. When leveraged long positions are liquidated, this increases selling pressure, which can further drop the price of Ethereum and lead to new liquidations. This phenomenon, well known to traders, has already caused several brutal crashes in the past, notably in 2021 and 2022.

According to Kevin Rusher, founder of the RAAC lending platform, a drop of Ethereum to $1,857 would trigger $136 million in liquidations, while a retreat to $1,780 would cause an additional $117 million. The worst-case scenario? A drop of 20% to $1,500, potentially liquidating $336 million in DeFi loans. This crisis would be notably fueled by a $130 million loan secured by ETH on Sky (formerly Maker).

If ETH drops that low, what to do?

A question plagues the minds of investors: can Ethereum really drop by 20%? Considering the recent market evolution, numerous factors could work against it. Macroeconomic uncertainty, reduced liquidity in the crypto markets, and a lack of enthusiasm among investors regarding current regulations are all elements to watch.

However, to mitigate this volatility of Ethereum, the integration of real assets such as real estate and gold into DeFi could offer a more stable alternative to investors. These assets, less subject to extreme fluctuations, would allow for portfolio diversification and limit cascading liquidations due to excessive leverage.

Ethereum is currently under surveillance. Will it withstand the pressure or plunge to new lows? Crypto traders must then prepare for potential increased volatility and adjust their strategies to avoid being caught on the wrong side of the market.