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Following the major correction on the cryptocurrency market, Ethereum and other large-cap coins have faced strong selling pressure that, in the case of Ether, resulted in a rapid drop from $3,200 to $2,500.
Liquidation sequence
As Ethereum has lost up to 30% of its previously gained value, the market was hit with an unpleasant record of the largest liquidation sequence in Ethereum's history.
1/ As a major correction sent ETH falling from $3.2k to $2.5k in the past week, on-chain liquidations surged as positions started to hit their liquidation point.
— Delphi Digital (@Delphi_Digital) January 24, 2022
Last Friday, money markets on ETH experienced their largest liquidation event to date, amounting to over $200m. pic.twitter.com/Pel0GtYUDQ
According to data provided by Delphi Digital, money markets on Ethereum have experienced liquidations amounting to over $200 million. As the research firm reports, the largest liquidation volume was observed on MakerDAO.
The decentralized platform charges a liquidation penalty if the user's vault value collateral reaches its liquidation price. The scheme theoretically allows the platform to make money from liquidations that appear on the platform.
Open interest decrease
In addition to the large liquidation volume hitting markets, Ethereum futures contracts, options and other derivatives have experienced a large drop in open interest after the first hints of a rate hike in the future from the Fed.
Open interest in Bitcoin and Ethereum futures have dropped to $6 and $3 billion, respectively, after reaching their peak in November. Open interest in Ethereum futures remains at approximately $10 billion back in the middle of November when the second-biggest cryptocurrency was trading at approximately $4,200.
At press time, Ethereum is trading at $2,440 after the 12% rebound from yesterday's bottom. Since the all-time high, Ethereum has lost half of its previously gained value and now trades at July's level.
Vladislav Sopov
Dan Burgin