DeFi Under Siege: Record Ethereum Liquidation Shakes Investors

The magic of Trump is in full swing. Between the fiasco of his memecoin, the crash of bitcoin and altcoins, and now Ethereum, nothing seems to be spared. The digital asset that the former president wants to integrate into the strategic reserve of the United States has seen dark days. In February, ETH suffered a violent liquidation that shook the entire crypto market, highlighting the flaws and brutality of decentralized lending protocols.

Ethereum plunges: 500 million dollars liquidated in a few days

The figures are chilling: 500 million dollars of ETH liquidated in a few days, making it the second largest monthly liquidation in the history of DeFi, just behind the May 2021 crash (670 million dollars).

The Aave and Compound lending platforms were the hardest hit. Their automatic liquidation mechanism did its job, but not without damage. Third-party liquidators rushed to the under-collateralized positions, recovering collateral at bargain prices, between 5 and 15% below market.

Enough to awaken the worst memories of 2021.

• 2.06 million ETH (5.09 billion dollars) were collateralized on Aave;
• 3.56 billion USDT also at stake;
• Billions in USDC, wstETH, and other tokens involved.

“If ETH falls below $1,780, $372 million in leveraged positions will be wiped out,” warns @Backdoor_News. A prophecy that almost came true.

So, when is the next purge?

A bloodbath on crypto exchanges and derivatives

The carnage did not stop with Ethereum. The entire crypto market was shaken, and the figures are dizzying. Bitcoin and ETH fell by 18% and 26% respectively, triggering a cascade of liquidations.

Bybit, the only exchange to reveal its true liquidation data, recorded an historic week:

• • $1.4 billion in long positions liquidated;

• • $383 million evaporated in a single day, on February 25;

• • More than 41% of ETH futures contracts closed on Bybit.

Other crypto exchanges like Binance, OKX, and Huobi have been more discreet, probably due to a underestimation of actual liquidations. Meanwhile, investors are watching for the next wave. The Dude emphasizes:

Over $4 billion in leveraged positions were liquidated last week.

The message is clear: the crypto market is a minefield. But how far will this hemorrhage go?

In short, February ended on a nightmarish note for Ethereum, with a 20% drop in three days. Another proof that crypto is not a smooth river.