The recent sharp drop in the cryptocurrency market has brought Ethereum (ETH) prices closer to key support levels. Certain collateralized debt positions in the DeFi ecosystem, particularly at MakerDAO, have been directly affected by this decline, potentially facing liquidation risks. On Tuesday, a position worth over 126 million dollars narrowly escaped liquidation by just an $80 price difference. However, the current market trend suggests that significant liquidations could occur in the coming days.

Ethereum plummeted by 20% in the past 48 hours, dropping to $2,180 at the beginning of the week. This decline has jeopardized the value of ETH used as collateral on MakerDAO, nearing critical liquidation levels. Analysis indicates three major positions are at risk of liquidation: the first liquidation could be triggered at $1,929, with another significant position expected to be liquidated at $1,844. A drop to $1,796 could trigger the third and largest wave of liquidation. The total value of these three positions amounts to $349 million, potentially causing a significant wave of liquidation within MakerDAO’s ecosystem.

Big liquidation waves in the market can intensify price movements, leading to chain reactions. When a liquidation occurs in collateralized debt protocols like MakerDAO, the ETH held as collateral is either sold off or put up for auction, potentially causing further drops in ETH price. Trade firms and major investors often aim to take advantage of market volatility by targeting these liquidation levels. Following the start of a liquidation process, rapid price drops and mandatory position closures can result in sudden and severe market movements.

According to DeFiLlama data, there is currently $1.3 billion worth of ETH ready to be liquidated in the market. Of this amount, $427 million is positioned at a level that can 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, previous cycle highs, to 0.0235. This was primarily due to institutional investors showing strong interest in spot BTC ETFs and significant fund inflows increasing Bitcoin’s market dominance. Additionally, the rise of alternative blockchains like Solana and Base also contributed to diminishing Ethereum’s market share.

The price movements of ETH point to critical support and resistance levels that investors need to carefully monitor in the coming days. A break below $1,929 could trigger larger liquidations. If downward momentum accelerates, testing the $1,796 level and further liquidations from there could lead to more significant drops in ETH price as possibilities.

However, if major buyers in the market absorb this new supply, a recovery from these levels is also possible. Historical price movements show that ETH has surged rapidly following major liquidation processes. Therefore, it is crucial for investors to closely monitor the market’s reaction following liquidations.