Ethereum’s Drop Below $1.9K Puts Major DeFi Loan at Risk, Raising Liquidation Concerns
Ethereum (ETH) faced heavy selling pressure on Monday, plunging nearly 10% to $1,820 and putting a major decentralized finance (DeFi) loan at risk of liquidation on the lending platform Sky (formerly Maker).
The borrower, who took out a $74 million DAI stablecoin loan by pledging 65,680 ETH—valued at approximately $130 million earlier in the day—was forced to take action as the market tumbled.
With the loan’s liquidation threshold slightly above $1,900, the borrower moved to protect their position. Blockchain data from Debank reveals that they withdrew 2,000 ETH (worth around $4 million) from Bitfinex and deposited it into the Maker vault to boost collateral. As ETH prices continued to slide, they later withdrew $1.6 million in USDT from Binance, converted it to DAI, and used it to pay down part of the loan, reducing the debt to $73.1 million.
Despite these efforts, the liquidation price for the loan now stands at $1,836, uncomfortably close to ETH’s recent trading level of around $1,870.
More DeFi Loans Face Liquidation Risk
This is not the only DeFi loan in danger due to ETH’s rapid decline. According to DefiLlama, approximately $13.6 million in loans are set to be liquidated at $1,857 ETH, while another $117 million faces liquidation at $1,780. If ETH were to drop another 20%, roughly $366 million in debt would be forced into liquidation.
Mass liquidations in DeFi can create a negative feedback loop, as protocols automatically sell off collateral from liquidated loans, adding further selling pressure to the market. This dynamic could accelerate Ethereum’s decline if prices continue to weaken.
