DeFi Lending Platforms Liquidate Record $115M in Loans as ETH Price Drops

You can send an Ethereum transaction, or you can buy yourself a steak dinner.

Feb 23, 2021 at 3:38 p.m. UTC
Updated Sep 14, 2021 at 12:15 p.m. UTC

A record-high $115 million in decentralized finance (DeFi) lending positions were wiped out Tuesday after the price of ether continued to correct to as low as $1,406 on Tuesday. The cryptocurrency has shed 9% in the past 24 hours, according to the CoinDesk 20.

Compound Finance saw the largest number of liquidated positions with some $86 million, or 75% of the total liquidations coming from that platform, according to data provider DeBank.

MakerDAO followed in a distant second with some $10 million in liquidations, or 8% of the total. Aave v1 and v2 combined for a total of $13 million, or 11% in liquidations.

DeFi lending liquidations were spurred by a continued drop in the price of ether paired with historic transaction fees.

A sharp 15% correction in the price of ether Monday caused some $25 million in loan liquidations, a three-month high. Nov. 25 saw the previously highest liquidation volume for the emerging financial tech stack with $93 million liquidated.

Historically high gas fees may be one reason mass liquidations are taking place on the lending platforms. The cost of an average transaction set records yet again Tuesday with new highs of $39 for a basic ether transaction, according to data provider Blockchair. For many loans, forcing a liquidation by not closing or topping off the position may end up being cheaper due to high transaction costs.

The DeFi asset class in general has experienced a sharp selloff as well, down some 13% according to Messari. However, indexes of the asset class remain in the green over the past 30 days with nearly 50% gains, as can be seen on the DeFi Pulse Index (DPI).

DISCLOSURE

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.