Ethereum Liquidation Risks Soar as $547M Worth of ETH Faces Forced Selling

A significant number of Ethereum (ETH) holders are facing the threat of forced selling in DeFi lending protocols due to liquidation risks.

According to on-chain data from Lookonchain, 343,075 ETH worth $547 million is currently near liquidation thresholds across various DeFi platforms. This exposure is concentrated between $1,362 and $1,566, with the majority of vulnerable positions at the lower end of this range.

The single largest chunk of at-risk collateral is 137,908 ETH sitting at a liquidation threshold of $1,361.73. If ETH drops by around 12% from its current price, this position would automatically be unwound.

However, the more pressing concern lies higher up the price ladder. On Maker and Aave V3, significant amounts of ETH face liquidation at prices slightly above current levels. For example, 46,741 ETH on Maker is exposed at $1,565.72, while another 58,032 ETH on Aave V3 is at risk at $1,555.04.

When a borrower's collateral falls below the required ratio, smart contracts will automatically sell the collateral on the open market. If multiple positions are liquidated simultaneously, this can lead to increased selling pressure and further price drops, potentially triggering more liquidations.