TLDR
ETH price dropped nearly 10% on Monday, falling to $1,820, its lowest since December 2023
A $74 million DeFi loan backed by $130 million in ETH is at risk of liquidation
Only 50% of Ethereum holders remain in profit, down from 82% at the start of 2023
$1.8 billion worth of ETH left exchanges last week in the largest outflow since December 2022
If ETH price continues declining, it could test support at $1,700 or even $1,300
Ethereum has faced serious pressure in the market recently. The second-largest cryptocurrency dropped by nearly 10% on Monday, falling to $1,820. This marks its lowest price point since December 2023.
The sudden drop has sent shockwaves through the DeFi sector. Ethereum serves as key collateral for many loans in decentralized finance platforms.
A major concern centers on a $74 million loan on the Sky platform (formerly known as Maker). This loan is backed by 65,680 ETH tokens worth nearly $130 million earlier on Monday.
The loan’s liquidation level sits just above $1,900. When ETH dropped below this threshold, it put the entire loan at risk of liquidation.
Blockchain data shows the borrower took quick action. They withdrew 2,000 ETH (worth about $4 million) from crypto exchange Bitfinex and added it to their collateral.
The borrower didn’t stop there. As prices continued falling, they withdrew $1.6 million in USDT stablecoin from Binance. They converted this to DAI and used it to reduce their debt to $73.1 million.
Despite these efforts, danger remains. The loan’s new liquidation level stands at $1,836, still very close to ETH’s recent trading price of around $1,870.
This loan isn’t the only one at risk. According to DefiLlama data, $13.6 million worth of loans face liquidation if ETH hits $1,857. Another $117 million in loans would be liquidated at $1,780.
The broader picture looks even more concerning. If ETH falls another 20%, about $366 million in debt could face liquidation.
These liquidations could create a downward spiral. When loans get liquidated, their collateral gets sold off. This creates more selling pressure on ETH’s price.
Market data shows investor sentiment has turned negative. According to Glassnode, only 50% of Ethereum holders remain in profit. This compares to 82% at the start of the year.
Technical Analysis
Technical analysis paints a bearish picture. ETH has traded below the Ichimoku Cloud since January 25, suggesting the downtrend may continue.
Some analysts point to $1,700 as the next support level. If this fails to hold, they warn of “catastrophic liquidations” that could drive prices even lower. Some even suggest $1,300 as a possible target.
However, not all signals are negative. Last week saw $1.8 billion worth of ETH move from exchanges to private wallets. This marks the largest outflow since December 2022.
Such movements typically indicate long-term holding plans rather than preparation for selling. This could signal that some investors see the current prices as a buying opportunity.
If demand increases, optimistic analysts suggest ETH could eventually recover to $4,045. This would represent a 120% gain from current levels. However, such a recovery seems unlikely in the near term while bearish sentiment controls the market.
