The massive sell-off in mid-May fueled volatility in the markets and triggered liquidations among several decentralized finance protocols. Like the earthquake, the market crash triggered the largest wave of liquidations in DeFi history. The market experienced a higher volume of liquidations on May 19 than in the previous two years in the DeFi space.
As part of the Market Insights bi-weekly newsletter, Cointelegraph Consulting collaborated with Covenant to investigate liquidations on Ava, Compound and Maker. While all the three DeFi protocols locked down account for about 50% of the total value, accordingly As for DappRadar, they saw a recent liquidation breaking a record of over $1.17 billion worth of collateral.
The biggest single day of liquidation ever was May 19 as the three protocols together saw $377 million worth of collateral liquidated. Av’s account stands at $170 million, while Compound isn’t far behind with $147 million worth of liquidations, and Maker is responsible for $60 million worth of liquidations.
The data shows that the dynamics of recent liquidations bear a striking resemblance to tsunami waves, the second of them occurring on 23 May when Ether (ETH) the price declined from its all-time high of $4,332 to $1,925. The day marks a liquidation of over $160 million, with the compound outpacing Aave by value.
Liquidation on the compound also set a new record. Previously, the protocol faced a liquidation of over $88 million in November as a result of the sudden price surge of the Dai stablecoin.
The recent wave of liquidations was also the largest in terms of the number of liquidations. The data indicates that there have been a total of 13,323 liquidations in the history of the protocol studied, with more than a third of the total liquidations on the top three DeFi platforms as a result of the recent market turmoil.
Of the 5,012 liquidations that occurred after the price began to drop on May 19, 64% came from Aave, 29% from Compound and 7% from Maker. Notably, there were more liquidations on May 23 than May 19, which is unrelated to the price liquidated data in the protocol.
There have been a total of 418 keepers in the history of the three protocols, but the top five make up more than 57% of the total liquidations, with the top 25 liquidators accounting for more than 91% of all liquidations. The largest keeper has liquidated over $220 million across all three protocols.
Similarly, the three protocols have 4,148 liquidated users, with the largest address facing $72 million liquidation. The top 10 liquidation users account for more than 33% of the total liquidations. Data indicates that there are 169 addresses in which over $1 million have been liquidated.
The recent market drop was a test of DeFi’s viability. Despite the pitfalls, the protocols have survived the stress test. Ave’s TVL crosses $20 billion mark Provides evidence of positive user sentiment towards the possibilities of the protocol.
However, going forward for the increasing rate of DeFi adoption, it will be important for protocols to introduce mechanisms that protect users from unexpected loss of funds as well as educate them about the inherent risks.
For the latest news, market signals and fundraising activity wrap-ups, download full marks of Cointelegraph Consulting’s bi-weekly newsletter.