Ethereum (ETH) crash: Is there a panic and liquidation on MakerDAO?

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Approaching filter wave – MakerDAO is a decentralized finance protocol fromEthereum. This makes it possible to create a stable DAI against the collateral of other cryptocurrencies. However, in times of a severe market downturn, defaults on some large loans can lead to waves of liquidation.

contracting pic shieldwhich specializes in blockchain security, has just highlighted a The alarming situation on the MakerDAO protocol.

In fact, after the drop in the price of ETH, currently around $1,300, Many loans contracted under the protocol could be in default.

A cautionary tweet by Peckshield regarding MakerDAO
Warning tweet posted by Peckshield regarding MakerDAO – Source: Twitter.

Thus, the value deposited as security no longer covers the amount borrowed. In such a case, the protocol will settle the loan default by liquidating the collateral. to do this, The collateral will be sold to cover the user loan.

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but, A loan of 3.3 million from DAI is currently on the verge of default. In fact, it will be liquidated if the price of ETH falls below $1,284.

Unfortunately, reselling such a large amount of ETH may cause the ETH price to drop temporarily. This drop, in turn, can lead to the liquidation of other loans, which in turn will affect the price of ETH, Send the protocol to Vortex Filter.

An event of this kind was already observed in March 2020. This episode was called Black Thursday, and it led to the liquidation of hundreds of loans.

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