An Ethereum user managed to avert a potential liquidation disaster involving MakerDAO positions worth $360 million on Tuesday, injecting collateral just in time as ETH prices plunged.
One significant position was on the verge of liquidation at a price of $1,928, triggered by a market decline during U.S. trading hours. Within two short minutes of facing liquidation in a MakerDAO auction, the wallet holder added 2,000 ETH from Bitfinex as extra collateral and repaid $1.5 million in DAI stablecoin.
The wallet surprised many by taking action, especially since it had been dormant since November.
Despite the intervention, the position isn’t entirely secure; it still faces liquidation if ETH drops to $1,781 unless further collateral is provided. As it stands, Ether is trading at $1,928, recovering from Monday’s low of $1,788.
Another wallet, suspected to belong to the Ethereum Foundation, reportedly deposited 30,098 ETH (worth approximately $56.08 million) to lower its liquidation threshold to $1,127.
While widespread liquidations worth millions are not unusual in derivatives markets, decentralized finance (DeFi) protocols like MakerDAO rely solely on spot assets. Therefore, when a liquidation occurs, the available DeFi liquidity struggles to meet the imbalance created by the supply of spot assets. This scenario differs in derivative exchanges, where higher volume and liquidity are typically associated with leverage.
In this instance, even a single nine-figure liquidation at MakerDAO could trigger a drop in ETH prices, potentially leading to further liquidations of vulnerable positions.
According to DefiLlama, there are currently $1.3 billion in liquidatable assets on Ethereum, with $352 million of that amount lying within 20% of the current price level.