In the last 24 hours, more than $5.4 million in collateral has been liquidated on defi platforms.
ethereum took the most brutal hit, accounting for $4.2 million of the total liquidations. According to data from ParsecA new threat of destabilization if eth falls to $3,008 could trigger an additional $24 million in liquidations.
On-chain derivatives exchanges like GMX, Kwenta, and Polynomial have been at the center of these liquidations, which together generated more than $52 million in the last day alone. When collateral is settled in the defi context, it means that the platform or protocol is selling the assets pledged as collateral for loans.
<img decoding="async" width="1024" height="345" src="https://crypto.news/app/uploads/2024/03/Tokenomics-1024×345.png” alt=”defi liquidation”/>
In defi lending, loans are often overcollateralized to account for the volatility of cryptocurrency prices. However, when the market price of the collateral asset, such as 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, resulting in potential losses for the borrower.
ethereum is trading at approximately $3,338, marking a 15% drop over the past week. The overall cryptocurrency market capitalization is down 3.5% today and is facing a notable sell-off after a month-long rally.
