- Ethereum is facing near billion-dollar liquidation pressure
- $900 million worth of ETH will be liquidated across three DeFi exchanges if it hits the $1,200 region
- Microstrategy would be required to deploy funds to shore up a loan if Bitcoin follows suit
Ethereum is facing a near billion-dollar liquidation pressure if it hits $1,100, according to data from Parsec Finance. The data suggests that should ETH hit the $1,200-$1,100 region this would trigger a mass liquidation event on multiple exchanges which could set off a flash crash, reminiscent of what was seen in March 2020. Should Bitcoin follow, MicroStrategy will have to deploy funds to shore up a $200 Bitcoin loan.
Spectre of Liquidation Cascade Looms Large
Blockchain reporter Colin Wu reported yesterday that the liquidations would start at $1,150, with both ETH and wBTC potentially affected, although the impact on ETH would be worse, with nearly $500 million of on-chain collateral facing liquidation:
According to parsec finance, when ETH falls to around $1150, nearly $500 million of on-chain collateral will face liquidation; wBTC will have more than $300 million of on-chain collateral near $21,600 or face liquidation.https://t.co/LPL1opNoNg pic.twitter.com/yUcdL60PiO
— Wu Blockchain (@WuBlockchain) June 12, 2022
Muse Research founder Jinze Jiang updated these figures this morning, upping the figure on ETH alone to $900 million, with the $1,100-$1,200 range being the catalyst, made up of AAVE and MakerDAO ($350 million) and $170 million on Compound. At the time of writing, ETH is perilously close to this range:
Any such liquidations could well take ETH below the $1,000 level, with support of sorts at $1,052, although this has not been tested since being set in January last year.
There is one saving grace however, as pointed out by Jiang:
However, these two loan agreements should be the first 50% liquidation, and they will not be sold all at once.
MicroStrategy Close to Having to Deploy More Funds
The threat to liquidation of wBTC meanwhile is mainly through MakerDAO, where the $20,200 level will see $340 million in liquidation orders, with AAVE and Compound contributing $70 million in selling orders between $21,800 and $22,800.
Should prices drop to these levels we will likely also see liquidations from centralised exchanges where the data is less easily available, while MicroStrategy will also be forced to deploy more capital to shore up a loan taken out in order to buy $200 million worth of bitcoin in March.
