On Tuesday, a prudent Ethereum user took decisive action to prevent a potential $360 million liquidation cascade within MakerDAO, just as Ethereum’s price began to plummet. This timely intervention added collateral to several positions at the last possible moment during a tumultuous trading session in the U.S.
One notable position stood on the brink of liquidation, with a critical liquidation price set at $1,928. This precarious situation arose as the market experienced a sharp decline during U.S. trading hours. Remarkably, the Ethereum in question was less than two minutes away from being liquidated and subsequently sold at a MakerDAO auction. However, the owner swiftly reacted by depositing 2,000 ETH from Bitfinex as additional collateral, alongside repaying $1.5 million worth of the DAI stablecoin.
This unexpected move caught many by surprise, especially since the wallet associated with the owner had been dormant since November. Yet, it served as a stark reminder of the volatility that characterizes the world of decentralized finance.
Despite this last-minute reprieve, the position remains precarious. It is still at risk of liquidation if ETH slips to $1,781 or if further collateral is not added. Currently, Ether is trading at $1,928, having recently rebounded from a low of $1,788 recorded on Monday.
In another strategic move, another wallet—suspected by the X account Lookonchain to be associated with the Ethereum Foundation—deposited 30,098 ETH (approximately $56.08 million) to reduce the liquidation risk of its position to an impressive $1,127.
While significant liquidations are relatively common across derivatives markets, the scenario differs in decentralized finance (DeFi) protocols like MakerDAO, which rely solely on spot assets. Consequently, when a liquidation event occurs, the liquidity within DeFi may struggle to accommodate the imbalance in spot asset supply, a dynamic not typically seen on derivatives exchanges where higher volumes and liquidity are fueled through leverage.
In fact, a single nine-figure liquidation within MakerDAO could very well depress Ethereum’s price, triggering a domino effect that endangers other vulnerable positions in the market.
Current data from DefiLlama indicates that there are $1.3 billion in liquidatable assets on Ethereum, with a staggering $352 million sitting within a precarious 20% of today’s price. As the market continues to navigate these unpredictable waters, the actions of individual users can play a pivotal role in stabilizing DeFi ecosystems.
