Forced liquidations happen when ETH prices drop sharply against leveraged positions, leading exchanges to automatically close positions and possibly cause cascading sell-offs, which further increase market volatility.

Understanding market dynamics and proactively managing risks are crucial for startups to survive the fragility of the current ETH derivatives environment and succeed in the evolving Web3 landscape.

Despite current volatility, Ethereum's institutionalization through ETFs and increased developer activity may support broader adoption in the medium to long term.

To navigate this volatile environment, strategies such as setting conservative leverage limits, using stop-loss orders, diversifying assets, monitoring markets in real-time, maintaining sufficient margin collateral, adopting a long-term perspective, and staying informed about market and regulatory developments are essential.

The Ethereum derivatives market is currently characterized by extremely high leverage ratios, which pose significant risks to small fintech startups and the broader crypto ecosystem.

The surge in ETH derivatives leverage could trigger a short-term market correction, potentially discouraging adoption among small and medium-sized enterprises.

High leverage amplifies both gains and losses, making forced liquidations more likely during downturns and resulting in rapid price drops.