The unforgiving nature of decentralized finance (DeFi) leverage was starkly illustrated as a major Ether (ETH) investor suffered a staggering liquidation event exceeding $100 million on the lending platform Sky. The incident serves as a brutal reminder of the risks inherent in volatile crypto markets.
The drama unfolded as the price of Ether experienced a sharp downturn, plummeting roughly 14% on April 6th. This price crash proved catastrophic for one particular “whale” – an investor holding a significant amount of cryptocurrency. According to data from DeFi Explore, highlighted by blockchain analytics service Lookonchain, this investor saw 67,570 ETH, valued at approximately $106 million at the time, forcibly liquidated from their collateralized debt position on Sky.
Sky, which underwent a rebrand from the well-known Maker protocol in August, allows users to borrow its native stablecoin, DAI (pegged to $1.00), by depositing crypto assets like Ether as collateral. The system operates on an overcollateralization model. Typically, users must maintain collateral worth significantly more than their loan – often 150% or higher. For instance, borrowing 100 DAI would require depositing at least $150 worth of ETH.
The protocol’s automated systems constantly monitor the value of the deposited collateral against the borrowed amount. If the collateral’s value (in this case, ETH) drops to a point where the collateralization ratio breaches a predetermined minimum threshold, the position is flagged for liquidation. In this whale’s case, the ETH price collapse pushed their ratio down to a critical 144%, triggering the automated liquidation process.
During liquidation on Sky, the platform seizes the collateral (the ETH) and auctions it off to recover the borrowed DAI, along with associated penalty fees. Any funds remaining after settling the debt are theoretically returned to the borrower, though steep market drops can significantly diminish or erase this remainder.
The market turmoil wasn’t isolated to this single massive liquidation. Blockchain analysis firm Spot On Chain reported that another large investor, who had supplied 56,995 wrapped ETH (worth around $91 million) to borrow DAI on the same platform, was teetering precariously close to a similar fate.
This specific event occurred against a backdrop of wider market distress. Ether’s price tumbled to levels ($1,547 at the time of writing in the source material) not consistently seen since the bear market depths of October 2023, a period still shadowed by the FTX collapse aftermath. Despite recent rallies, ETH remains significantly below its 2021 all-time high (down approximately 68% according to the source).
The broader impact was highlighted by data from CoinGlass, indicating that nearly $1 billion had been liquidated across roughly 320,000 traders in just 24 hours surrounding the event. Tellingly, ETH positions reportedly dominated the liquidations occurring in the most recent hours of that period, underscoring the asset’s central role in the ongoing DeFi deleveraging. Further price declines could trigger a cascade of similar liquidations for DeFi users unable to bolster their collateral levels quickly enough.
