Ethereum’s Price Drop Triggers DeFi Liquidation Fears, Putting $130M Loan at Risk
Ethereum (ETH) tumbled nearly 10% on Monday, falling to $1,820 and placing a large decentralized finance (DeFi) loan on Sky (formerly Maker) in danger of liquidation.
The borrower had taken out a $74 million DAI stablecoin loan using 65,680 ETH as collateral—valued at roughly $130 million earlier in the day. With ETH dropping below the loan’s liquidation level of just over $1,900, urgent action was required to prevent forced selling.
According to blockchain data from Debank, the borrower withdrew 2,000 ETH (approximately $4 million) from Bitfinex and deposited it into the Maker vault to strengthen their collateral. As ETH continued its descent, they later withdrew $1.6 million in USDT from Binance, swapped it for DAI, and used it to reduce their outstanding loan balance to $73.1 million.
Despite these defensive efforts, the liquidation threshold now stands at $1,836, leaving the loan in a precarious position as ETH trades near $1,870.
Wider DeFi Liquidation Risks Loom
This vulnerable loan is just one of many at risk. DefiLlama data shows that $13.6 million in DeFi loans could face liquidation if ETH drops to $1,857, while another $117 million is at risk at $1,780. If ETH falls another 20%, an estimated $366 million in DeFi debt could be liquidated.
DeFi liquidations can intensify selling pressure, as collateral from liquidated loans is automatically sold off, further dragging down prices. With ETH hovering near key support levels, traders are bracing for potential ripple effects across the market.
