A major Maker user narrowly avoided a ~$16 million penalty on a loan of ~$75 million taken in 2021 by promptly sending 2000 ETH and 1.5 million DAI.
Prior to sending additional ETH, the liquidation price was approximately $1932.08. The debt-to-collateral ratio of 65,675 ETH had dropped to 176%.
These actions reduced the liquidation level to $1874.98 and increased the loan’s collateralization ratio to 181.95%.
Amid further declines in Ethereum, the user withdrew 2882 ETH and used it to repay 5.21 million DAI, employing the Withdraw & Payback function. This lowered the liquidation price to $1781.28.
At the time of writing, the debt-to-collateral ratio stands at a critical 179.87%.
A former Maker employee known as andy8052 noted that Chronicle oracles update hourly, using lagging price data from the previous period. This system is designed to warn users of potential forced closure risks, giving them time to strengthen collateral or repay loans.
“Liquidation is not an instant destruction of ETH,” he explained.
Maker imposes a penalty for forced closure on under-collateralized vaults, adding it to the total debt. The protocol then auctions the trader’s collateral, leaving the trader responsible for the remaining debt, including the penalty.
According to DeFi Llama, some MakerDAO users face liquidation risks if oracles record Ethereum prices below $1796.7 and $1777.8.
At stake are 61,000 ETH ($115.4 million) and 65,400 ETH ($123.87 million), respectively.
Overall, loans totaling $320.1 million are at risk of forced closure, with liquidation levels less than 20% from the current spot rate.
Analysts at Lookonchain reported a whale selling 25,800 ETH ($47.8 million) at a $32 million loss to avoid forced closure on Aave. The user retains 35,034 ETH ($64.68 million) with a “health factor” of 1.4 and a liquidation price of ~$1316.
Additionally, experts highlighted a transfer of 30,098 ETH ($56.1 million), presumably linked to the Ethereum Foundation, to Maker to lower the liquidation level to $1127.06. The wallet holds 100,394 ETH ($182 million).
Currently, this address holds 100,394 ETH ($182 million) on Maker, with a liquidation price of $1127.06.
Some whales were not as fortunate. Lookonchain recorded a forced closure of a position with 67,675 ETH ($121.8 million). The user added 2000 ETH ($3.73 million) and 1.54 million DAI to lower the liquidation level to $1836.43, but spot market prices fell below this threshold.
Back in March, the price of the second-largest cryptocurrency by market cap fell below the upward trend line from post-Terra crash levels.