Ethereum (ETH) Price Declines Amid Recession Fears, Long Liquidations, and DeFi Loan Risks

Ethereum (ETH) has experienced a significant drop, with its price falling by more than 11.75% over the past 24 hours, currently hovering around $1,900. At its lowest point today, ETH traded as low as $1,755, marking its lowest price since October 2023. Several key factors are contributing to this downturn, including macroeconomic concerns, long liquidations, and risks from crypto loans backed by ETH.

Macroeconomic Pressures and Broader Market Declines

Ethereum’s price drop is not an isolated event; it reflects the broader trend in risk-on assets amid growing concerns about a U.S. recession. The combined market capitalization of the crypto market has fallen by over 4.6% in the past 24 hours, aligning with sell-offs in U.S. stocks. JPMorgan has raised the likelihood of a U.S. recession in 2025 to 40%, up from 30%, citing U.S. President Donald Trump's "extreme policies" as a contributing factor.

Additionally, Goldman Sachs has increased its 12-month recession probability from 15% to 20%. These economic concerns have exacerbated the volatility in the crypto market, particularly for assets like Ethereum, which has historically shown sensitivity to macroeconomic shifts.

Earlier in March, President Trump imposed 25% tariffs on goods from Mexico and Canada and 10% tariffs on Chinese imports. In retaliation, both Canada and Mexico have indicated plans to impose tariffs on U.S. goods, further escalating trade tensions. Meanwhile, China has already retaliated by increasing tariffs on U.S. products, intensifying concerns about a global trade war. These escalating trade disputes are expected to drive consumer prices higher and contribute to inflation in the U.S.

As recession fears grow, Ether, along with other top-ranking cryptocurrencies like Bitcoin, has mirrored the performance of U.S. stocks, which have shown a 52-week correlation of 0.69 with the S&P 500 index as of March 11. This positive correlation means that the crypto market is more likely to decline in tandem with falling U.S. stocks, especially given the ongoing trade tensions and uncertainty about the Federal Reserve’s future actions. The bond market also signals no imminent rate cuts, dampening the risk appetite for both equities and cryptocurrencies.

Risks from DeFi Loans and Potential Liquidations

The pressure on Ether’s price is also driven by risks within the decentralized finance (DeFi) sector. Recently, a $74 million DeFi loan on the Sky protocol, collateralized with $130 million in ETH, came dangerously close to liquidation as Ether’s price fell below the critical liquidation level of around $1,900.

To avoid liquidation, the borrower added $34 million in ETH as collateral. However, with ETH’s price continuing to slide, the liquidation level remained just above $1,800. If Ethereum’s price falls another 20%, it could trigger a cascade of liquidations, exacerbating the downward pressure on the asset. Currently, nearly $353 million in debt is tied to such loans, creating the potential for further sell-offs as borrowers scramble to stabilize their positions.

Long Liquidations Add to the Downward Pressure

Ethereum’s sharp decline is also due in part to massive long liquidations in the crypto market. Over the last 24 hours, more than $240 million worth of ETH positions were liquidated, with long liquidations accounting for 82% of this total, or $196.27 million. These forced liquidations occur when leveraged traders are unable to maintain margin requirements, and exchanges automatically sell their holdings to cover losses.

The liquidation of long positions accelerates the price decline, triggering further sell-offs and creating a feedback loop that deepens the downward trend. In total, the broader crypto market experienced $897.26 million in liquidations across all assets.

Technical Analysis: Ethereum Eyes Potential Decline Toward $1,700

From a technical perspective, Ethereum’s price movement is currently following an inverse-cup-and-handle (IC&H) pattern, which typically signals a bearish trend. The rounded top formation (cup) indicates a loss of bullish momentum, with sellers gradually taking control of the market. The temporary consolidation (handle) around $2,700 suggests a failed breakout attempt, and ETH has now broken below key support levels, confirming the IC&H breakdown.

The measured move target from this pattern suggests that ETH could fall further, potentially reaching around $1,700. This aligns with key support levels that traders are closely watching. The 50-day exponential moving average (EMA) at $2,600 and the 200-day EMA at $2,929 are both significantly above the current price, reinforcing the bearish sentiment.

What’s Next for Ethereum?

The immediate outlook for Ethereum remains uncertain, with several potential scenarios in play. If ETH’s price continues to struggle within its descending channel, it could test the $1,700 support level, which aligns with the downside target of the inverse-cup-and-handle pattern. However, a potential rebound could push the price back toward the upper trendline of the descending channel, with a possible upside target of $2,000.

Given the ongoing macroeconomic pressures, DeFi loan risks, and long liquidations, Ethereum’s price will likely remain volatile in the near term. Investors should closely monitor the broader market trends, key support and resistance levels, and any shifts in market sentiment as factors that could influence Ethereum’s price direction.