ETH Liquidation: 17K Tokens on Aave Protocol at Risk in the $2,800 Range

Ethereum (ETH) proved resilient, easily bouncing above $3,000 after corrections in the past weeks. However, the token now sits in a risky space, within hundreds of dollars of a series of ETH liquidation levels.

ETH traded around $3,070.30 on Tuesday, remaining within its tight range. Low-volume activity of around $13M in 24 hours is enough to keep ETH in its usual tight range. Liquidations are still happening across protocols and on centralized exchanges, despite precautions and automated mechanisms.

But some price levels remain riskier than others. Decentralized protocols currently get sufficient support at many key price levels, but there are clusters that may be affected from relatively small corrections.

Ethereum fluctuated easily between $2,900 and $3,300 in the past month, though sometimes showing significant short-term volatility.

Aave Protocol Collateral to Liquidate Under $2,880.20

An immediate and large liquidation cluster is now close to current price levels on Aave protocol. Other vaults and DeFi services are holding collaterals at much lower ETH levels accrued over the past years.

Currently, around 17,167 ETH are at risk for liquidation if prices drop under the collateral level of $2,880.20.

In addition to Aave, Maker DAO is exposed to ETH risk through its vaults, and has a series of liquidation levels below $2,700.

A single wallet with 9,232.50 ETH is at risk of liquidation at $2,714.92. Those wallets and vaults at risk often resort to DeFi Saver, attempting to alert and prevent liquidations.

DeFi Saver offers multiple vault controls through the Safe app, as a tool to monitor and automate DeFi risk exposure. ETH has shown it can easily dip to a lower range within a few days, often causing hundreds of millions of dollars in liquidations. One of the latest targets were Lido DAO addresses, which liquidated at the $3,080 range.

In centralized trading, ETH liquidations remain relatively low, with mostly short positions liquidated in the past day.

The past week was relatively stressful for traders, exposing the additional complexity of risk management tools.

DeFi and LRT Have Sufficient Collaterals

One of the risks of early DeFi were the deep liquidations which cost many traders their collaterals. Currently, the Ethereum ecosystem is also padded by Liquid Staking Tokens, which often deviate from the price of ETH on exchanges, and may keep the ecosystem safer from liquidations.

The recent market events were also far from previous series of $1B or more in liquidations daily.

The Ethereum decentralized ecosystem is returning with a force in 2024. Various projects contain more than $54B in notional value, while producing $2.78M in fees each day. Nearly $25M in value enter Ethereum DeFi every day.

ETH Traders Put Weight on Long Positions

Short liquidations diminished on Binance in the past few days. However, open interest on the ETHUSDT perpetual futures is growing.

Open interest grew in the range of a day, up to $2.1B in notional value. Long positions dominated at more than 77.93% of all open interest, while market takers were predominantly buying ETH.

Exchange reserves for ETH also indicate interest in withdrawals and buying. In the past 6-8 weeks, ETH reserves have been falling slowly, sliding under $13B in value. Peak selling happened at above $4,000 and since then, there are signs of accumulation.

Ethereum is still used in re-staking. The Eigen protocol increased and consolidated its holdings above $15B in total value locked. Physical ETH tokens are still needed for staking, as well as for vaults and collateral wallets.

On the other hand, the trend may reverse, as some whales may still seek to sell some of their ETH.

Recently, wallet watchers also noticed one of the older pre-mine addresses move ETH for the first time in nearly nine years.