Ethereum News Today: Investors Braced for ETH Liquidation Tsunami at $3,800
- Ethereum approaches $3,800 as $7.87B in short positions face liquidation risk due to leveraged exposure imbalance. - $1.103B in long liquidations at $4,200 vs. $680M in short liquidations at $4,450, heightening volatility risks. - Historical 6% price drops triggered $179M in ETH liquidations, while September’s -12.55% average returns amplify bearish bias. - Analysts warn of deeper corrections but note open interest contractions and negative funding rates may hint at potential rebounds.
$7.87 billion in Ethereum (ETH) short positions are at risk of liquidation as the cryptocurrency approaches the critical $3,800 price level. According to Coinglass, a significant imbalance exists in leveraged exposure, with $1.103 billion in long liquidations at $4,200 versus $680 million in short liquidations at $4,450 [1]. However, as the price continues to decline, the liquidation risk for short positions is now estimated at $7.87 billion, amplifying the potential for a sharp correction or volatility spikes.
The concentration of long positions above $4,200 makes the market vulnerable to cascading liquidations if ETH drops further. Historical examples, such as a $179 million in ETH-related liquidations during a 6% price drop [2], illustrate how leveraged positions can intensify downward momentum. A similar dynamic could occur if the price falls below $4,200, triggering a self-reinforcing cycle of selling pressure and more liquidations.
Conversely, a breakout above $4,450 could lead to a short squeeze, but the smaller amount of short liquidations at that level—$680 million—suggests the upside potential is limited. Investors are advised to remain cautious, as a short squeeze is less likely to sustain a prolonged rally compared to the larger long liquidation risk below $4,200. This structural bias toward the downside raises the probability of further price deterioration in the near term.
Additional data highlights the magnitude of potential losses if the price continues to trend lower. For instance, if ETH falls below $4,254, the cumulative long liquidation intensity on major centralized exchanges will reach $2.178 billion [2]. Meanwhile, a move above $4,677 could trigger $1.691 billion in short liquidations. These figures indicate that the market is highly leveraged and sensitive to price movements around key levels.
Traders and investors are encouraged to employ risk mitigation strategies, such as using stop-loss orders and avoiding overexposure to leveraged products. The broader context of Ethereum’s price action, including technical indicators like the Ichimoku cloud and RSI readings, also points to a weakening trend. Analysts have noted that September has historically been one of the weakest months for ETH, with median returns averaging -12.55% during this period [3]. This seasonal weakness, combined with the current leverage imbalance, increases the likelihood of a deeper correction into the month.
Despite the bearish bias, some analysts suggest that open interest and funding rate patterns may indicate a potential reversal. A contraction in open interest and negative funding rates currently suggest that long positions are being flushed out, which could set the stage for a rebound if spot demand returns. However, any such recovery would need to overcome significant psychological levels, including the $4,000 threshold and the $3,900–$3,700 fair value gap . A breakdown below these levels would signal a significant shift in the structure of the market.
In conclusion, Ethereum’s leverage profile underscores the high risk of further downside as it approaches key liquidation levels. With $7.87 billion in short positions at risk, the potential for a sharp price correction is significant. Investors should closely monitor real-time liquidation data and macroeconomic developments, including Ethereum network upgrades, to navigate the volatile market environment ahead.
Source:
[1] Ethereum's Imbalance in Long vs. Short Liquidation Risk
[2] If ETH falls below $4254, the cumulative long liquidation...
[3] Ether breaks below 'Tom Lee' trendline: Is a 10% incoming?
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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