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DeFi lending protocol Compound sees its biggest day of liquidations since v2 protocol launch

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Compound saw $2,534,760 worth of collateral liquidated on March 8 – a record high since the launch of its v2 lending protocol in May of last year.

The price of ether (ETH) plunged over the weekend, dropping from above $250 to around $200. Since borrowers tend to use ETH as collateral, the price dip rendered many loans under-collateralized, triggering their liquidation. MakerDAO, another lending protocol, as well as exchange dYdX also saw liquidation spike over the same period, although those occurrences were not as substantial as those seen on Compound.

 

 

"I think it's mainly because they [Compound] have a more aggressive collateral ratio. And the incentives are higher to liquidate there because you get paid immediately instead of entering an auction," DeFi simulation platform Gauntlet Networks CEO Tarun Chitra told The Block.

Outstanding loans on Compound, MakerDAO, and dYdX also took a hit over the weekend, dropping by 1.8% from $75,042,115 Friday to $73,683,069 Sunday across the three platforms.

[caption id="attachment_58176" align="aligncenter" width="681"]

Source: LoanScan[/caption]

The move perhaps reflects traders' desire to deleverage their positions as the global markets face increasing volatility.

In addition to ETH, the price of BTC also fell over the weekend from above $9,000 to around $8,400, with CME Bitcoin futures daily volume hitting a 2020 low last Friday.

Beyond crypto, equity and commodity markets are also in a state of turmoil. The global oil price plunged as much as 30% over the weekend, while the U.S. Treasury 10-year yields trended below 1% for the first time during the same time period.

"Everyone is deleveraging at the same time, and the liquidations are a lagging indicator of that," said Chitra.

This report's headline has been updated for clarity.