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The local asset of Ethereum 
$1,588, Ether (ETH), has seen a substantial decrease of approximately 11.5% in the last 24 hours, raising concerns among market participants. This decline brings to light a potential liquidation risk of $340 million in collateralized debt positions on MakerDAO. On-chain data indicates that significant liquidations could occur if the ETH price falls to certain levels.
Liquidations Triggered by ETH Price Drop
As ETH hovers around $2,390, fluctuations in global markets are influencing investor sentiment. Particularly, the risk of large-scale liquidations is heightened due to leveraged positions in the cryptocurrency market. Analyses suggest that if ETH prices drop to $1,926, $1,842, or $1,793, three major positions on MakerDAO could face liquidation.
Leveraged trading in the cryptocurrency market can yield significant profits during bullish phases, but can lead to cascading liquidations during sharp declines. Similar scenarios in the past have shown price drops reaching 30%, with high leverage exacerbating these processes. Recent data indicates that approximately $296 million worth of ETH positions were liquidated across various platforms within the last 24 hours.
Investors Reassess Their Strategies
The steep decline in ETH prices is prompting investors to reevaluate their risk management strategies. According to analyses, if prices fall an additional 19%, the liquidation risk on MakerDAO is expected to increase further. This scenario could trigger cascading liquidations in decentralized finance (DeFi) protocols and lead to broader market fluctuations.
The current market uncertainty is pushing investors to adopt various methods to minimize their risks. Notably, during periods of high leverage, liquidation waves can lead to more substantial losses. While long-term investors might see lower price levels as buying opportunities, short-term investors are opting for a more cautious approach.
According to current data, ETH has lost a total of 42% since December 16. However, some experts assert that such fluctuations are inherent to the cryptocurrency market. Although predicting market conditions remains challenging, it is emphasized that investors should exercise caution in this volatile environment.
