Ethereum is in a dangerous position as lenders could face a massive cascade of liquidations worth about $500 million
According to blockchain insider Colin Wue and Parsec Finance on-chain tracker, the Ethereum lending market is in peril as the price of ETH reaches dangerous levels and could cause a real catastrophe.
The problem is in the number of liquidations that will appear in the market if ETH falls below or below $1,150. Reportedly, more than $500 million in on-chain collateral and $300 million in on-chain collateral near $21,600 will evaporate.
The massive liquidation will fuel further market decline and massive outflow of funds from decentralized applications. The sharp decline in the use of decentralized applications will reduce the network’s revenues.
Previously, several market and on-chain tracking services reported more than $700 million in liquidations, which was ultimately a flaw on the API side of the centralized exchange. But with more than $500 million in real liquidations, the pressure on the asset will increase dramatically.
Market bleeds after inflation data
The main cause of the cryptocurrency market sell-off is the unexpected inflation data. The deepening devaluation of the US dollar caused a rally in commodities such as gold, which added more than 3% to value in 24 hours.
More risks on Ethereum appeared after the depegging of the stETH to ETH pair caused by the massive sell-off and lack of liquidity. The sell-off was driven by the declining profitability of the ETH 2.0 strike contract, the reorganization of the test network and profit-taking from early depositors.
Risky assets such as cryptocurrencies and technology stocks experienced massive outflows and falls in value. Bitcoin has lost more than 5.5% in value in 24 hours and Ethereum collapsed 12%.