More than $5.4 million worth of collateral has been liquidated across defi platforms in the past 24 hours.
Ethereum took the most brutal hit, accounting for $4.2 million of the total liquidations. According to data from Parsec, a further threat of destabilization if ETH drops to $3,008 could trigger an additional $24 million in liquidations.
On-chain derivatives exchanges such as GMX, Kwenta, and Polynomial have been at the center of these liquidations, which cumulatively triggered over $52 million in the past day alone. When collaterals are liquidated in the context of defi, it means that assets pledged as security for loans are being sold off by the platform or protocol.
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ETH trading volume across defi protocols | Source: Parsec
In defi lending, loans are often over-collateralized to account for the volatility of cryptocurrency prices. However, when the market price of the collateral asset, like Ethereum (ETH) in this case, drops sharply, it can trigger a liquidation event. The platform automatically sells the collateral to ensure the loan is repaid, often at a lower market value, leading to potential losses for the borrower.
Ethereum is trading at approximately $3,338, marking a 15% decline over the past week. The overall crypto market cap is down by 3.5% today and is faced with notable liquidation after a month-long rally.
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