A drop in Ether's price could lead to massive liquidations in the decentralized finance sector, warns Kevin Rusher.
Potential Consequences of ETH Price Drop
If the price of Ether falls by a further 20%, it could trigger up to $336 million in decentralized finance liquidations. Kevin Rusher noted that a price drop to $1,857 would trigger $136 million in liquidations, and a drop to $1,780 could trigger an additional $117 million in loan liquidations.
Crisis Catalysts and Possible Mitigation Methods
Rusher identifies a single $130 million ETH-backed loan in the Sky system, formerly known as Maker, as the main source of this crisis. Despite efforts by the borrower to add more collateral, the loan is on the verge of collapse. Rusher suggested integrating real-world assets like real estate and gold to offset volatility and prevent cascading liquidations.
Current Price Dynamics of ETH and Forecasts
Ether has dropped to multi-year lows against Bitcoin, indicating a potential additional 30% drop. In the past seven days, ETH has declined by over 15% and trades well below its 200-day exponential moving average. The relative strength index (RSI) is currently at 31, nearly in oversold territory, potentially representing a local bottom.
In the current market volatility, players are advised to conduct thorough research and evaluate risks carefully.
