Ethereums price dipped below the $4,000 mark earlier today, causing a major liquidation that wiped out a whales $45 million position.

The event has prompted debate within the crypto community, with some analysts viewing it as a bear trap while others question the safety of decentralized finance.

ETH Crash Wipes Out $45M Position

Ethereum’s (ETH) price dropped to $3,994 during Thursday morning trading in Asia, marking its lowest level since early August. Following the decline, blockchain analytics platform Lookonchain reported a major liquidation involving a large ETH holder.

Whale 0xa523 saw their entire long position of 9,152 ETH, valued at $36.4 million, wiped out in the event. His cumulative losses have now surpassed $45.3 million, leaving less than $500,000 in his account.

The incident has sparked discussion across the crypto community on X. Notably, crypto veteran Chainyoda said that in today’s market, decentralized finance offers no such thing as low risk. He added that Vitalik Buterin’s view has been misinformed by those who overlook the dangers in today’s protocols.

The Ethereum co-founder had claimed in a recent essay that DeFi has matured into a safer, more stable ecosystem. However, the recent wipeout event suggests otherwise.

Some critics questioned why such a massive position was opened without a stop loss, while others warned that the heavy use of leverage in DeFi makes even big investors vulnerable. Another user noted that the leverage game “always has high stakes.”

Is ETH’s Crash a Bear Trap?

Despite the second-largest cryptocurrency’s momentary decline, some analysts remain highly bullish on its long-term trajectory. Charting Guy described the dip as a bear trap, suggesting that the correction is made to shake out overleveraged traders before ETH resumes its upward trend.

An X user under the handle hitman42.eth supported this view, noting that high-risk traders were likely being pushed out of the market while more strategic investors accumulated at the bottom. In support of the analysis, another trader said they would be buying into the dip.

Earlier this month, crypto analyst Johnny Woo had warned that Ethereum’s September sell-off could be “the biggest bear trap in history,” pointing to a potential head-and-shoulders pattern that may soon be invalidated in Uptober.

He predicted that the crypto asset would drop to a support level of approximately $3,350 in September before rebounding in October and reaching new peaks in November. A similar pattern had occurred in September 2021, when ETH dropped 30% only to surge to new all-time highs two months later.