The recent sharp decline in the cryptocurrency market has brought Ethereum (ETH) prices close to significant support levels. Some collateralized debt positions in MakerDAO, a key player in the DeFi ecosystem, are directly affected by this drop, facing liquidation risks. Just on Tuesday, a position worth over $126 million narrowly avoided liquidation by only an $80 price difference. However, the current market trend suggests that significant liquidations could occur in the coming days.

With a 20% drop in the last 48 hours, Ethereum plummeted to $2,180 earlier this week. This decline has endangered the value of ETH used as collateral on MakerDAO, bringing them closer to critical liquidation levels. Analyses indicate that there are three major positions facing liquidation risks in the market: the first liquidation could be triggered at $1,929, while a second large position is expected to be liquidated at $1,844. A drop to $1,796 could trigger the third and largest wave of liquidation. The combined value of these three positions amounts to $349 million, signaling a significant wave of liquidation in the MakerDAO ecosystem if prices reach these levels.

Significant liquidation waves in the market often intensify price movements, leading to chain reactions. When a liquidation occurs in collateralized debt protocols like MakerDAO, the held ETH is sold or auctioned off. These sales may cause additional drops in the price of ETH. Trading firms and major investors typically target these liquidation levels to benefit from market volatility. Particularly after a liquidation process starts, a rapid price drop and further closure of positions can result in sudden and severe market movements. According to data from DeFi Pulse, there is currently $1.3 billion worth of ETH ready to be liquidated in the market. $427 million of this amount is positioned at a level that could be triggered with just a 20% drop in the current price.

Throughout the recent bull market, Ethereum has shown weak performance against Bitcoin (BTC). The ETH/BTC pair dropped significantly from 0.156 and 0.088 levels, previous cycle highs, to 0.0235. One of the main reasons for this has been the strong interest of institutional investors in spot BTC ETFs and large fund inflows, increasing Bitcoin’s market dominance. Additionally, the rise of alternative blockchains like Solana and Avalanche has also contributed to diminishing Ethereum’s market share.

Ethereum price movements point toward critical support and resistance levels that investors should carefully monitor in the coming days. A break below $1,929 could trigger larger liquidations. If the downward movement accelerates, testing the $1,796 level and resulting in liquidations from there causing further drops in ETH price is a possibility.

However, if major buyers in the market absorb this new supply, a recovery from these levels is also possible. Past price movements show that Ethereum rapidly rises after significant liquidation processes. Therefore, it is crucial for investors to closely watch the market’s reaction after liquidations occur.