A major Ethereum (ETH) investor faced a massive liquidation exceeding $100 million on the decentralized finance (DeFi) lending platform Sky as ETH prices plummeted over 14%.
Key Details of the Liquidation Event
- Whale's Loss: 67,570 ETH (worth ~$106 million) liquidated on April 6 during the price crash.
- Platform: Sky (formerly Maker) lending protocol, used for creating collateralized debt positions (CDPs).
- Mechanism: The position was automatically liquidated when ETH's collateral ratio fell to 144%, below Sky's minimum requirement.
How Sky's Lending Protocol Works
- Users deposit crypto (e.g., ETH) as collateral to borrow DAI stablecoins.
The system enforces overcollateralization (typically 150%+).
- Example: Deposit $150 worth of ETH to borrow $100 DAI.
- If ETH's value drops and the collateral ratio falls below the threshold, positions face liquidation.
Broader Market Impact
- ETH price dropped to $1,547 (14.5% decline in 24 hours), nearing October 2023 lows.
- Market-wide sell-off triggered by macroeconomic concerns.
- 320,000 traders liquidated in 24 hours (~$1 billion total losses).
FAQs
Q: What happens during a DeFi liquidation?
A: The protocol confiscates collateral (e.g., ETH), auctions it to repay the borrowed DAI, and returns any remaining funds to the user.
Q: How can users avoid liquidation?
A: By maintaining sufficient collateral ratios or depositing additional funds when prices drop.
Q: Why did ETH's price crash?
A: Macroeconomic uncertainty and broader crypto market sell-offs contributed to the sharp decline.
👉 Learn how to protect your crypto assets from volatility
Q: Are other whales at risk?
A: Yes—Spot On Chain reported another whale with 56,995 wETH ($91M collateral) is nearing liquidation.
👉 Explore DeFi strategies to manage risk
Key Takeaways
- DeFi protocols like Sky automate liquidations to protect system solvency.
- ETH's price volatility exposes highly leveraged positions to cascading risks.
- Traders should monitor collateral ratios closely during market turbulence.
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