The cryptocurrency market is still extremely volatile. It is a massive long position in Ethereum (ETH) that has put several whale investors on the brink of liquidation.
In the last 24 hours, we’ve seen two major whales in Ethereum make significant moves to prevent the liquidation of their ETH holdings. Moving the price of Ethereum is very precarious right now. And these moves by whales? Liquidation in the crypto market has hit over $1.37 billion.
Whale Strategies to Avoid Liquidation in the Midst of Market Uncertainty
In one of the most notable moves, whale address “0x7d6” holding a colossal 270,000 $ETH (worth approximately $395 million), has taken proactive steps to manage the risk of liquidation on the Maker platform.
To lower their liquidation price and maintain their position, whale “0x7d6” repaid 3.52 million $DAI (a stablecoin pegged to the US dollar) and deposited an additional 60,000 $ETH.
These actions have helped reduce their liquidation price to $912 per ETH.
This tactic underscores the predicaments confronting whales holding massive stakes in a choppy market. By repaying some of their obligations and stuffing more collateral into their position, whale “0x7d6” has basically earned a deferment on the life of the position. It is paying interest and principal to somebody, and apart from keeping this accounting of the deal fresh, the move doesn’t change the likelihood that the price of $ETH could tank further, with significant downside effect on this whale’s position.
At the same time, another whale, identified as “0xab7,” has gone through a similar experience. This whale held 49,018 $ETH (around $72 million) and was just about to get liquidated a week ago. To avoid that fate, the whale sold off approximately 8,000 $ETH (worth about $11.5 million). Even after that massive sale, however, this whale still seems to be at risk, with a liquidation price set at $1,418.34 for the $ETH.
The actions taken by these whale investors are clear indicators of just how volatile the cryptocurrency market can be and how even the most stable of cryptocurrencies can be affected. All across the crypto space, whales have been forced to take some pretty draconian actions to ensure that they and their shareholders don’t get wiped out. This has led to an increase in large-scale liquidations that have left a lot of folks inside and outside of the crypto space dangling and wondering just what in the world is going on.
A Wider Trend of Market Liquidations
What these two whales did is not unusual. Over the past 24 hours, the entire cryptocurrency market has experienced massive liquidations, with over $1.37 billion worth of positions getting closed out. This liquidating wave is obviously not hitting a just bunch of retail guys. It’s also hitting institutional investors. And why are these poor souls getting hit? Because they are on the wrong side of recent market moves. And how do we know they are on the wrong side? Because positions that get hit this hard usually get hit because they’re wrong.
Liquidations, especially of Ethereum and times during which prices may tend to be lower, tend to trigger a selling off of assets—a not so pleasant paradox of a volatile market—in that those involved with leveraging must now secure their profitable positions by parting with their assets. This sort of asset parting is what we call liquidity in the long run, though it is definitely not what you want with a parting asset in any immediate concerning moment. Whatever you might call it, asset liquidity is a definitely not a net good scenario for the asset market, as the price buckles under the weight of all that liquidity cleaning up
For these whales, the expectation is that Ethereum’s price will steady or recover before they’re forced to sell. Even if these two whale accounts are somehow able to keep Ethereum’s price above $900 (the Bitcoin Argosy’s latest price target)—and not just for a couple of days, which is what has happened so far in 2022—they’ll still be quite vulnerable to any big sell-offs in the Ethereum market. This dynamic underscores how precariously leveraged long positions balance on the Ethereum whale’s end.
The Future of Ethereum and the Risk of Further Price Drops
Everyone’s watching the price of Ethereum as the market keeps on fluctuating. The cryptocurrency has reeled off some whopper price corrections, and lots of analysts are asking if the current market conditions are going to lead us into a drawn-out downturn or if Ethereum is going to stabilize and recover, like in the good old days. For now, we’re monitoring these whale positions and using their movements on lending platforms like Maker and Aave to read some important tea leaves about market sentiment.
Should the price of Ethereum keep falling, it might compel a number of our more, shall we say, influential, and less-than-influential traders to sell off their positions. These traders include crypto “whales,” or traders with large amounts of cryptocurrency; traders using leverage, or borrowed funds; and even some trade associations affiliated with various pro-crypto politicians. This sell-off could theoretically create a ripple effect with downward pressure on the price of Ethereum, and, indeed, the rest of the crypto market.
Conclusion: A Tightrope Walk for Crypto’s Largest Players
Whales fighting to maintain their $ETH positions in a volatile market shine a light on the delicate nature of leveraged trading in the crypto space. Irrespective of the steps taken by some of these big crypto boys to trim their positions (and thus reduce the risk of being totally effed in a worst-case scenario), the current situation is so fraught with uncertainty that it just doesn’t feel safer condoning either for these elite investors or the common man.
The recent liquidations hitting the cryptocurrency market serve to sharply remind investors of the well-known risks associated with trading in this space. That said, the potential for huge profits—if you happen to time the market correctly—also exists. But as swing after swing in the market’s performance has shown us lately, when you’re on the wrong side of a swing, it’s easy to forget that you’re living through a simply exaggerated version of the ups and downs all trading entails.
Disclosure: This is not trading or investment advice. Always do your research before buying any Metaverse crypto coins.