Understanding Ethereum’s Impact on DeFi Liquidations
Recent on-chain data reveals that Ethereum’s price decline has put leveraged DeFi positions at risk of liquidation, with approximately $319.8 million in Ethereum-based loans teetering on the edge.
Key Insights:
- DeFi analytics platform DefiLlama reports that $246 million worth of collateral could be liquidated if Ethereum falls below $1,800.
- Leading DeFi lending platforms, such as MakerDAO and Compound, hold the majority of at-risk positions.
- MakerDAO accounts for $229 million of the total, while Compound users could lose around $17 million.
Potential Impact on the DeFi Ecosystem
If ETH drops by 19% from its current level of $1,872, it could trigger a liquidation cascade, affecting borrowers and causing market instability within the broader DeFi ecosystem.
What is a Liquidation Cascade?
A liquidation cascade occurs when falling prices prompt mass liquidations, leading to further declines and more liquidations. This chain reaction can result in rapid sell-offs and heightened market volatility.
