Ethereum Whales Suffer Heavy Losses as Crypto Market Tumbles
A Massive Liquidation Event on Sky Lending Protocol
An Ether investor who had a large position on decentralized finance (DeFi) lending platform Sky has been liquidated to the tune of more than $100 million as the price of Ether crashed.
The Ether (ETH) whale lost 67,570 ETH worth around $106 million when the asset crashed by around 14% on April 6, liquidating his collateralized debt position on Sky, according to Maker Vaults explorer DeFi Explore, and as observed by Lookonchain.
The Sky lending protocol, which rebranded from Maker in August, is used by DeFi participants to create collateralized debt positions by providing crypto, ETH in this case, to borrow the platform’s stablecoin, DAI (DAI).
How the System Works
The system uses an overcollateralization ratio, typically 150% or higher, meaning that users need to deposit at least $150 worth of ETH to borrow 100 DAI.
The protocol autonomously monitors the value of ETH collateral relative to the borrowed DAI, and if the ETH value falls and the collateral ratio drops below the minimum requirement, the position becomes eligible for liquidation.
This whale’s liquidation occurred when the ratio fell to 144% as the price of ETH plummeted.
ETH Whale Liquidations
According to DeFi Explore, another whale that supplied 56,995 wrapped ETH, worth around $91 million, to borrow DAI was on the verge of liquidation.
In a liquidation event, Sky seizes the ETH collateral, which is auctioned off to pay back the borrowed DAI plus fees. Any remaining collateral after the debt is paid is returned to the user.
Ethereum Price at Bear Market Lows
ETH prices have crashed a whopping 14.5% over the past 24 hours, falling to $1,547 at the time of writing as the wider crypto market melts down in reaction to US President Donald Trump’s tariff-induced market sell-off.
The last time ETH traded this low was in October 2023, when crypto was still deep in bear market territory, almost a year after the collapse of the FTX exchange.
ETH remains down 68% from its all-time high in 2021, and further losses are likely to see more DeFi users liquidated unless they can provide more collateral.
Wider Crypto Market Impact
According to CoinGlass, 320,000 traders have been liquidated over the past 24 hours to the tune of almost $1 billion dollars. The majority of liquidations over the past four hours have been ETH positions, it revealed.
Conclusion
The recent liquidation event on Sky lending protocol has highlighted the risks involved in DeFi lending and the importance of proper risk management. As the crypto market continues to experience volatility, it is essential for investors to stay informed and adapt to changing market conditions.
FAQs
Q: What is the Sky lending protocol?
A: The Sky lending protocol is a decentralized finance (DeFi) lending platform that allows users to create collateralized debt positions by providing crypto assets to borrow the platform’s stablecoin, DAI.
Q: What is the overcollateralization ratio?
A: The overcollateralization ratio is a mechanism used by the Sky lending protocol to ensure that users’ collateral is sufficient to cover their borrowed debt. Typically, the ratio is set at 150% or higher, meaning that users need to deposit at least $150 worth of ETH to borrow 100 DAI.
Q: What happens in a liquidation event?
A: In a liquidation event, the Sky lending protocol seizes the user’s collateral, which is then auctioned off to pay back the borrowed debt plus fees. Any remaining collateral after the debt is paid is returned to the user.
Q: How many traders have been liquidated in the past 24 hours?
A: According to CoinGlass, 320,000 traders have been liquidated over the past 24 hours to the tune of almost $1 billion dollars.
Q: What is the current price of ETH?
A: At the time of writing, the current price of ETH is $1,547.
