Escalation in DeFi Liquidation is Not Good for the Industry

1 Defi liquidation process intensifies, with a steep drop in ETH value, 2 Ether fell around 8% in the last five trading sessions. In the last few days, the crypto market witnessed nearly $385 Million liquidated in perpetual contracts; this is not good for the DeFi ecosystem. However, this recent spike can be attributed to the volatile situation pertaining to the market. Liquidation is a scenario where crypto exchanges close out long and short positions of traders when the initial margin goes below a required threshold.

Binge Liquidation in Decentralized Finance (DeFi), a Bad Scenario

The United States Securities and Exchange Commission’s tight regulations, and the issues surrounding Ethereum’s consensus have led to a big transition in the DeFi space. This has caused a rise in the number of liquidations taking place. Additionally, the DeFi market’s low liquidity and the high volatility of Ether have further exacerbated the situation. This has led to a large number of traders being liquidated, rather than making a profit from their investments.

Robert Wilson
Robert Wilson author

As the overseer of NicheBot's editorial content, I am committed to ensuring that all information published on our website is both accurate and relevant to our readers. My fervent support for the crypto industry has led me to closely monitor the developments within it since 2012, and I have contributed extensively to discussions and debates surrounding the world of Bitcoin.

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