Bitcoins
- Ethereum is under pressure due to leadership issues, stalling adoption, and declining on-chain metrics, casting aspersions on its dominance in the DeFi space.
- Ethereum’s value has dropped 52% over the past year, with a potential further decline if liquidations occur.
- A significant $130 million ETH-backed loan in Sky is causing concerns, highlighting the volatility and risk in crypto-backed loans.
- Kevin Rusher suggests integrating real-world assets into Ethereum’s DeFi ecosystem to mitigate overleveraging and potential liquidations.
Amid the crypto market’s broader struggles, one project in particular is feeling the pinch.
Ethereum is not having a good time.
Bitcoin’s commander-in-chief has slipped to under US $2,000 (AU $3,181) following a 15% slide in the past week.
Leadership struggles, stalling adoption and on-chain metrics slipping has seen Ethereum’s future as the king of DeFi brought into question.
Luckily, for now, most major competitors aren’t exactly stealing the spotlight – but if and when the bearish sentiment turns, Ethereum will have its work cut out for it.
And if it doesn’t succeed, some analysts believe hundreds of millions of dollars will bleed from the DeFi ecosystem.
Related: Bitcoin Dip to US$75K Possible After EU Returns Fire On Tariffs
A Market Contagion of Liquidations Could be on the Horizon if This Happens
The ETH sell-off could only just be getting started.
According to Kevin Rusher, Founder of the RAAC lending platform, approximately US $136m (AU $216m) worth of loans could be liquidated if Ether drops below US $1,857 (AU $2,950).
This could exacerbate an already dire situation for Ethereum, which has fallen 52% in value over the past 12 months.
If the liquidations come through, it’s possible ETH could drop as low as US $1,500 (AU $2,382) – a further 20% fall from its current lows.
Like a contagion, this drop could cause yet another mass liquidation among DeFi borrowers, to the tune of US $336m (AU $533m).
Sky Loan Causing Headaches, Rusher Calls for RWA Integration
The RAAC chief suggests that much of the potential liquidations can be traced back to a single loan.
The main catalyst of this crisis is a single $130m ETH-backed loan in Sky, formerly Maker, which is on the verge of collapse despite the borrower scrambling to add more collateral. Every cycle, crypto-backed loans suffer from extreme volatility, leading to cascading liquidations that crash the price of assets.
Kevin Rusher, Founder of RAAC
To counter the issue of overleveraging and the resultant liquidations, Rusher argued that Ethereum’s DeFi ecosystem should dig deeper into real-world assets – such as precious metals and debt contracts – as safer investments.
Ben Knight Read More