Traders on Aave, a decentralized liquidity protocol that runs on multiple platforms including Ethereum and OP Mainnet, has started selling Bitcoin (WBTC) to repay outstanding debt. WBTC is a tokenized version of Bitcoin issued on Ethereum, allowing holders to engage in decentralized finance (DeFi) activities.
According to Lookonchain data, an unidentified trader with the address “0x47ab” borrowed around $8 million worth of several stablecoins, including USDC, USDT, and DAI, Maker’s stablecoin, on Aave v2 after depositing various assets , including WBTC, Maker (MKR) and Ethereum (ETH) worth about $11 million.
Currently, the health factor of the borrowed assets is 1.09, which means it is close to liquidation. The health factor is a metric that compares the safety of collateral and borrowed loans with the underlying value. The higher the value, the safer the funds are from liquidation. If the health factor exceeds $1, the deposited collateral will be liquidated to cover outstanding loans.
Aave is a popular decentralized finance (DeFi) protocol where token holders can provide liquidity and earn passive income. At the same time, users can deposit collateral and borrow overcollateralized loans, which they can repay at any time as long as the health factor is around 1. Because loans are overcollateralized, the collateral is usually higher than the amount borrowed.
It appears that the trader has started selling WBTC to repay outstanding debt. A majority of the assets sold consists of WBTC, namely 366.56 WBTC, which is worth approximately $9.1 million at current prices.
However, due to the recent fluctuations in market prices, the decline has affected the health factor and increased the risk of collateral liquidation. To counteract this, the trader sold 3 WBTC for around $80,000.
The address still owes Aave V2 about $8.08 million, mostly in USDT, so about $5 million. There is also $3 million worth of USDC and around $368,000 worth of DAI. It is unclear whether the trader will try to take out more loans, especially if Bitcoin prices rise.
The address still retains a significant amount of MKR, the governance token of the MakerDAO protocol; Uniswap’s UNI; Chainlink’s LINK; and Ethereum. Aside from WBTC, ETH is the trader’s second largest holding, while MKR is the smallest. Ironically, MKR was one of the best performing assets, gaining over 160% in the second half of 2023 alone. The token peaked at $1,600 in early October before cooling down to the current price.
It remains to be seen how the situation will develop and whether the retailer will be able to fully repay the outstanding debt. The volatility of cryptocurrency markets can be very challenging, especially when it affects the security of borrowed assets.
2023-10-13 22:22:54
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