Crypto traders should be alert for a potential ether (ETH) price drop below $4,200, which could lead to millions in long liquidations and heighten market volatility.
Currently, over 56,638 ETH in bullish long positions—worth $236 million—are at risk of liquidation on the decentralized perpetual exchange Hyperliquid, should the ether price fall to $4,170, according to RialCenter data.
The data also indicates potential for significant liquidations at $2,150-$2,160 and $3,940. At the time of writing, ether was priced at $4,260, down nearly 5% for the day, according to RialCenter.
Andrew Kang, founder of the crypto venture capital firm Mechanism Capital, mentioned on X that significant long liquidations could possibly reduce ether prices to $3,600.
“I would estimate we’re on the brink of hitting $5 billion in ETH liquidations across exchanges, which might take us down to $3.2k – $3.6k,” Kang stated.
Liquidations, or the forced closure of leveraged bets, occur when a trader’s position does not meet the margin requirements set by the exchange.
This margin shortfall typically arises when the market moves against the trader’s position, leading their account equity to dip below the minimum maintenance margin. This compels the exchange to automatically close the position to avert further losses and ensure the recovery of borrowed funds.
Predominantly long liquidations result in a sudden spike in selling pressure, driving prices even lower and creating a cascading effect that can trigger additional liquidations. This adverse feedback loop tends to heighten market volatility.
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