Ethereum Could Lose 20% of Its Value and Trigger a Real Tidal Wave

Ethereum is going through a critical period, and a 20% drop could trigger $336 million in liquidations on the DeFi market.

Ethereum has been hovering above $1,800 for the past week, but a 20% drop from current levels could trigger $336 million in liquidations on the DeFi market, according to crypto analytics firm Glassnode.

Key Levels To Watch

As of August 10, 18,400 traders have opened leveraged long positions on derivatives exchanges, which would be liquidated if the price drops to $1,780. A further drop to $1,696 could trigger the liquidation of 6,373 traders who have sold put options.

If the bears manage to push the price below $1,500, it could lead to the liquidation of a $130 million loan secured by ETH on Aave, according to DeFi protocol analysis platform, DeBank. Liquidations of other large loans on platforms such as AnChain and DChain could add up to $206 million.

If ETH drops below $1,500, it could also trigger the liquidation of 14,630 traders who have sold put options and 3,444 traders who have opened leveraged short positions on derivatives exchanges.

If the bulls manage to defend the price above $2,007, it could lead to the liquidation of 14,434 traders who have sold call options and 6,784 traders who have opened leveraged short positions on derivatives exchanges.

How To Protect Your Crypto Portfolio From This Threat

With macroeconomic uncertainty, reduced liquidity in the crypto markets, and a lack of enthusiasm among investors regarding current regulations, investors need to be prepared for increased volatility and adjust their strategies accordingly.

One way to mitigate the risk of cascading liquidations due to excessive leverage is to integrate real assets such as real estate and gold into DeFi. These assets are less subject to rapid price movements and could offer investors a more stable alternative.

By diversifying their portfolios to include both crypto and real assets, investors can reduce their overall risk and increase their chances of success in the long term.