After a show of strength over the past few weeks, Ethereum fell below $ 2,000 for a brief moment. The cryptocurrency appears to have recovered, but the cryptocurrency market could still face resistance to return to pre-crash levels.
A report by Wu Blockchain claims that ETH’s price has barely escaped a major drop. Data from Philippe Castonguay shows that Justin Sun, CEO of the Tron Foundation, has a $ 1 billion position in the Ethereum-based Liquity Protocol.
That 606,000 ETH position was almost liquidated and due to its size could have caused the price to plummet below $ 1,500, or around $ 1,000. Castonguay said:
There was a 2 minute window where the Liquity Protocol went into recovery mode and Justin Sun’s $ 1 billion position could have been liquidated, but it didn’t happen. He just rebalanced his trove 5 minutes ago and paid off $ 300 million in debt.
However, Castonguay later made it clear that the protocol’s liquidation mechanism would have prevented ETH prices from falling. Liquity works with companies known as stability providers. Once a position is liquidated, 0.5% goes to the liquidators and 9.5% is distributed to each stability provider. Castonguay added:
His ETH would have been bought by the stability providers at the * market price *. Buyers would have met the seller at the same spot price.
JustinSun said in the Chinese community: I saved the cryptocurrency like a bullet going through the scalp … https://t.co/vG7GTeoeKF pic.twitter.com/FRMmaExnuq
– Wu Blockchain (@WuBlockchain) May 19, 2021
Justin Sun buys Bitcoin and Ethereum’s Dip
Sun took advantage of the decline in Bitcoin and Ethereum prices. He announced two major BTC and ETH purchases via his Twitter account. He made the announcement in the same way that large corporations have disclosed their crypto holdings.
For the former, Sun said it bought 4,145 BTC at an average price of $ 36,868 for an estimated $ 152 million. Sun said:
I bought many in one go today, this is just my #BTC purchase. Keep building, buy the DIP.
The second purchase was made for 54,153 ETH at an average price of $ 2,509 for an estimated $ 135 million. Sun quoted Michael Saylor, CEO of MicroStrategy, saying, “I don’t sell.”
At the time of writing, ETH was trading at $ 2,621, down 21.6% on the daily chart. In the weekly chart the ETH fell by 37.1% and in the monthly chart the profit remains at 17.2%.
While the recovery has been impressive, the market may not be out of the woods. Data from Analyst Material Scientist on May 17thth predicted a withdrawal of ETH against BTC. As the following chart shows, ETH had a retracement for this pair and was able to see further volatility in the coming days.
Additionally, ETH and the rest of the market appear to have increased their correlation with Bitcoin, as it usually does when major price movements occur. With this in mind, materials scientists also expect the BTC price to move sideways at the current level until at least June.