A major Ethereum investor lost over $100 million after a sharp 18% price drop on April 6. This incident has led to a wave of liquidations in the DeFi market, with other significant losses reported.
Liquidation of a Major DeFi Player
The investor, who locked 67,570 ETH worth about $106 million into the DeFi platform Sky, was liquidated. This platform requires users to maintain a collateralization ratio of at least 150%, meaning they must pledge $150 in ETH for every 100 DAI borrowed. The price drop in ETH caused this investor's collateral ratio to fall to 144%, resulting in an automated liquidation of his position.
Market Bracing for Further Consequences
Another major investor, who posted nearly 57,000 wrapped ETH, was reportedly on the brink of liquidation as well. Fears of a continuing decline in ETH prices raise concerns about a potential domino effect that could affect other leveraged positions in the DeFi market.
Current Situation in the Cryptocurrency Market
ETH's lowest price hit $1,547, a level not seen since October 2023. The market sentiment has also been negatively impacted by fears of an impending recession spurred by new tariffs imposed by President Donald Trump. The crypto market has experienced a downturn similar to traditional financial markets, with nearly $6.6 trillion erased in value over two days.
The sharp decline in Ethereum prices and subsequent liquidations highlight the potential vulnerabilities of the DeFi ecosystem to shifting market dynamics. Without fresh capital inflows, other borrowers may face similar risks.
