Ethereum's Price Plummets: Liquidation Risks Loom for the Foundation

As Ethereum (ETH) continues to face significant price drops, the Ethereum Foundation is grappling with potential liquidation risks that could threaten its financial stability. With ETH trading below $1,900, the situation has raised alarms across the cryptocurrency market, particularly within the decentralized finance (DeFi) sector.

Key Takeaways

• Ethereum's price has fallen below $1,900, marking a nearly 10% decline in just 24 hours.

• The Ethereum Foundation faces a potential liquidation risk of over $900 million if ETH drops to $1,100.

• A significant DeFi loan backed by ETH collateral is at risk of liquidation, exacerbating market pressures.

• Institutional interest in ETH is waning, with recent outflows indicating a lack of confidence.

Current Market Conditions

Ethereum's recent price decline has sent shockwaves through the cryptocurrency ecosystem. As of March 10, 2025, ETH is trading around $1,850, a stark contrast to its previous highs. This downturn has not only affected individual investors but has also put the Ethereum Foundation in a precarious position due to its heavy reliance on ETH as a treasury asset.

The foundation's treasury, valued at approximately $970.2 million as of October 2024, has seen a significant drop from $1.6 billion in March 2022. This decline is attributed to both annual expenditures and the overall decrease in ETH's price.

Liquidation Risks for the Ethereum Foundation

The Ethereum Foundation's financial strategy has come under scrutiny as it faces potential liquidation risks. If ETH's price were to fall to $1,100, the foundation could see liquidations exceeding $900 million. This scenario is particularly concerning given that 81.3% of the foundation's treasury is held in cryptocurrencies, predominantly in ETH.

Recent treasury movements indicate that the foundation has been actively managing its assets, selling portions of ETH to cover operational costs. However, continued price declines could force the foundation to sell larger portions of its holdings at unfavorable prices, further jeopardizing its financial health.

DeFi Sector Under Pressure

The DeFi sector, which relies heavily on ETH as collateral, is also feeling the strain. A significant loan on the Sky platform, backed by approximately $130 million worth of ETH, is at risk of liquidation as ETH's price hovers near critical thresholds. If ETH drops below $1,836, the loan could be liquidated, triggering a cascade of selling pressure that could further depress ETH's price.

Data from DefiLlama suggests that if ETH falls to $1,857, around $13.6 million worth of DeFi loans could face liquidation, with potential total liquidations reaching $366 million if ETH drops by another 20%.

Institutional Interest Declines

Adding to the challenges, institutional interest in ETH appears to be waning. Recent reports indicate that there have been significant outflows from spot ETFs, totaling $406 million. This decline in institutional demand, coupled with ETH's inflationary state and low staking yields, has created a less favorable environment for potential investors.

Conclusion

The current situation for Ethereum is precarious, with the foundation facing significant liquidation risks and the DeFi sector under pressure. As ETH's price continues to fluctuate, the next few weeks will be critical in determining whether the foundation can stabilize its financial position and whether the broader cryptocurrency market can recover from this downturn. Investors and market analysts alike are watching closely as the future of Ethereum hangs in the balance.

Sources

• Ethereum Foundation Faces Liquidation Risk Amid Market Downturn, FinanceFeeds.

• Ethereum Plunges Below $1,900: DeFi Sector Under Pressure as Major Liquidation Risk Looms, FXLeaders.

• Ethereum Foundation Risks $900M Liquidation in MakerDAO Debt Crisis, Coinpedia.

• Ether's Freefall Below $1900 Jeopardizes Crypto Loan Backed by $130M ETH, CoinDesk.

• Ethereum Price Crashes Below $2k, Cryptonews.