ETH’s Plunge Under $1.9K Disrupts DeFi Markets, Threatens $130M in Crypto-Backed Loans

Ethereum’s Plunge Threatens Major DeFi Loans, Raising Liquidation Risks

Ethereum (ETH) tumbled nearly 10% on Monday, falling to $1,820 and bringing a massive decentralized finance (DeFi) loan on the lending platform Sky (formerly Maker) dangerously close to liquidation.

The borrower had taken out a $74 million loan in DAI stablecoin, backed by 65,680 ETH—valued at roughly $130 million earlier in the day. However, as ETH’s price dropped below the loan’s liquidation threshold of just over $1,900, urgent action was needed to prevent forced liquidation.

Blockchain data from Debank shows that in response, the borrower withdrew 2,000 ETH (worth approximately $4 million) from Bitfinex and deposited it into the Maker vault to shore up collateral. Later, as ETH continued its decline, they withdrew $1.6 million in USDT from Binance, swapped it for DAI, and used it to reduce the loan balance to $73.1 million.

Despite these moves, the loan remains on shaky ground, with its liquidation level now set at $1,836—just slightly below ETH’s recent trading price of $1,870.

Broader DeFi Liquidation Risks Loom

The risks extend beyond this single loan. DefiLlama data indicates that roughly $13.6 million in DeFi loans are at risk of liquidation if ETH reaches $1,857, while another $117 million faces forced selling if ETH dips to $1,780. If the downturn deepens and ETH falls another 20%, an estimated $366 million in DeFi debt could be liquidated.

Liquidations in DeFi markets can intensify selling pressure, as collateral from liquidated loans is automatically sold off, further driving prices down. With ETH hovering near critical support levels, traders are closely watching for potential ripple effects across the broader crypto market.