Ethereum’s decline leads to more than $5.4 million in liquidations on Defi platforms
Defi platforms have witnessed an astonishing $5.4 million worth of collateral being liquidated within the last 24 hours. The largest blow was dealt to Ethereum, accounting for a staggering $4.2 million of the total liquidations. Data from Parsec reveals that there is a looming threat of further destabilization if the value of ETH drops to $3,008, which could result in an additional $24 million in liquidations.
These liquidations have primarily taken place on on-chain derivatives exchanges like GMX, Kwenta, and Polynomial. The cumulative effect of these liquidations has triggered a massive $52 million loss in just one day. When we speak of liquidations in the context of defi, it refers to the sale of assets that were pledged as security for loans by the platform or protocol.
Defi lending often involves over-collateralization of loans to compensate for the volatile nature of cryptocurrency prices. However, if the market value of the collateral asset, such as Ethereum in this case, plummets sharply, it can trigger a liquidation event. In order to ensure loan repayment, the platform automatically sells the collateral, often at a lower market value, potentially resulting in losses for the borrower.
At present, Ethereum is being traded at around $3,338, indicating a 15% decline over the past week. Moreover, the overall cryptocurrency market cap has dropped by 3.5% today, leading to significant liquidation after a month-long rally.
For more information:
BitMEX is investigating suspicious trading activity that caused Bitcoin to plummet to $8.9k.
Check out the trading volume of ETH across defi protocols on Parsec.
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