The Ethereum blockchain's native cryptocurrency, ether (ETH), is still the main focus. Friday morning saw a spike in liquidations in the second-largest cryptocurrency in the world based on market capitalization, both before and after the U.S. Securities and Exchange Commission (SEC) approved applications late Thursday to list eight spot Ether exchange-traded funds (ETFs).
The total amount of Ether liquidations over the last 24 hours, according to data from the derivatives analysis platform CoinGlass, has exceeded $150 million. This is likely due to leveraged traders being caught off guard by volatile price swings that occurred either side of the SEC's application approval.
Remarkably, almost 70% of those liquidations happened on the long side of the market, i.e., positions in ether that were expected to rise in value. The price of the cryptocurrency fell sharply to about $3,500 just before the decision was made, but it quickly rose to over $3,800 minutes after it was approved.
In the world of derivatives trading, liquidations take place when a broker forcibly closes a position because there isn't enough margin or capital in an investor's account to cover possible losses.
These situations are typically brought on by extreme price swings, like the ones Ether experienced on Thursday.
The SEC's approval of Ether's application has caused increased volatility in the entire asset class as investors consider what this decision means for other digital assets. In general, total crypto liquidations have moved closer to $400 million, marking their highest level since May 1.
Critical points despite persistent volatility
Ether's price fluctuated within a falling wedge for several months after peaking above the crucial $4,000 level in early March. However, earlier this week, the price of Ether staged an impressive 19% breakout as conjecture grew that the SEC might unexpectedly approve applications for spot Ether ETFs.
The price has stayed erratic on above-average trading volumes since Monday's wild day.
If Ether's price keeps rising, the $4,093.88 high from March 12 should be kept an eye on as a possible area of resistance. If there is a strong break above this barrier, Ether may reach its all-time high of $4,867.81 in November 2021.
On the other hand, watch the $3,150 level on the chart, which receives support from the wedge's breakout point as well as the 50-day moving average, if you want to trade lower.
This area provides significant support from both a technical and fundamental standpoint, as it is where the falling wedge's breakout point intersects with the 50-day moving average.
Ethereum's price surge also resulted in increased liquidations within the market.
Spike in Ether Liquidations Amid Price Volatility
In the past 24 hours, $150 million or more in Ether has been forfeited due to market instability following the SEC's statement. Furthermore, the majority of Ethereum sell-offs, which accounted for nearly 70%, were triggered by bullish bets on the cryptocurrency's price growth.
Insufficient funds in an investor's account to meet potential loss requirements in the midst of price volatility, such as that experienced by Ethereum on Thursday, result in the broker carrying out a compulsory closing of the position, known as a liquidation.
In conclusion, the SEC's approval of applications to list the eight spot Ether exchange-traded funds has significantly impacted the Ethereum market, leading to a sharp increase in volatility and a substantial spike in liquidations.
And as investors navigate this heightened volatility, key technical levels such as the $4,093.88 resistance and the $3,150 support remain critical for future price movements. The market's reaction underscores the broader implications of regulatory decisions on the cryptocurrency landscape.