ETH falling by 20% may trigger $336M in DeFi liquidations — Web3 exec

If the price of Ether (ETH) falls by a further 20%, the price decline could trigger a cascade of up to $336 million in decentralized finance (DeFi) liquidations, according to Kevin Rusher, founder of the real-world asset (RWA) lending platform RAAC.

The executive warned that a decline to $1,857 would trigger $136 million in liquidations, and a price drop to $1,780 could potentially trigger an additional $117 million in loan liquidations — making these the next price levels to watch.

Rusher added that the worst-case scenario would be a 20% drop in ETH’s price to around the $1,500 price level, which could liquidate $336 million in DeFi loans, sending the markets tumbling. In a written statement shared with Cointelegraph, Rusher said:

“The main catalyst of this crisis is a single $130m ETH-backed loan in Sky, formerly Maker, which is on the verge of collapse despite the borrower scrambling to add more collateral. Every cycle, crypto-backed loans suffer from extreme volatility, leading to cascading liquidations that crash the price of assets.”

The executive called for integrating RWAs, such as real estate and gold, which feature much stabler values, into the DeFi ecosystem to offset volatility and prevent cascading liquidations due to overleveraging.

Related: 3 reasons why Ethereum can outperform its rivals after crashing to 17-month lows

ETH price crumbles; more pain coming?

Ether has dropped to multi-year lows against Bitcoin (BTC), signaling another potential 30% drop against the supply-capped asset, and led to some analysts predicting a potential $1,600 price bottom for ETH.

ETH’s price has declined by over 15% in the past seven days and has been trading well below its 200-day exponential moving average (EMA) since February.

The relative strength index (RSI) is currently at 31, which is almost in oversold territory, potentially representing a local bottom and could signal an impending price reversal.

Ether’s disappointing price action prompted calls from some market analysts to shift into higher-performing altcoins to maximize profit potential.

“If still stuck on ETH, it is likely a good time to dump it to buy a higher beta altcoin,” trader Alex Krüger said in a March 12 X post.

Magazine: Pectra hard fork explained — Will it get Ethereum back on track?

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.