Ethereum Whales on MakerDAO Face $238M Liquidation Risk as ETH Nears Critical Level

Two Ethereum whales on MakerDAO are on the brink of a $238 million liquidation as ETH hovers dangerously close to the $1,800 mark. This precarious situation underscores the broader challenges facing Ethereum and the DeFi sector amidst a significant price decline.

• Ethereum whales at risk of $238M liquidation
• ETH price decline impacts DeFi sector
• Layer-2 networks and token proliferation raise concerns

The first whale borrowed over $75 million in DAI (a stablecoin pegged to the US dollar) using 60,810 ETH (Ethereum’s native cryptocurrency worth $110 million) as collateral. If ETH falls below $1,793, this whale faces liquidation, a process where assets are sold off to cover a loan when the collateral’s value drops too low. The second whale borrowed over $68 million in DAI against 64,792.7 ETH (worth $122 million) and is at risk of liquidation at $1,787. These figures come from Lookonchain and Arkham Intelligence, highlighting the high stakes for these high rollers.

The broader DeFi sector is feeling the pinch of ETH’s 45% year-to-date decline. Total Value Locked (TVL, the total amount of assets locked in DeFi protocols) across Ethereum-based platforms has dropped from over $66 billion to $50 billion since the start of the year, according to Defillama. While Aave and Sky (formerly MakerDAO) have seen TVL increases, heavyweights like Lido, EigenLayer, Ethena, Uniswap, and Pendle are experiencing declines. This TVL drop reflects the sector’s vulnerability to fluctuations in ETH’s value.

The crypto market’s struggles aren’t just due to ETH’s internal dynamics. Rising US inflation and President Trump’s tariffs are casting a long shadow over the market, contributing to the downturn. Yet, for Ethereum, the pain is compounded by what some see as self-inflicted wounds. Analysts like Quinn Thompson and Nic Carter have raised alarms:

“Ethereum’s value proposition as an investment ‘dead,’ noting the decline in transaction activity, fees, and user growth.” – Quinn Thompson

“The #1 cause of this is greedy eth L2s siphoning value from the L1 and the social consensus that excess token creation was A-OK. Eth was buried in an avalanche of its own tokens. Died by its own hand.” – Nic Carter

Layer-2 networks (secondary frameworks built on top of Ethereum to improve its scalability) and the proliferation of tokens have been cited as major drags on ETH’s value. These networks, while improving efficiency, may be siphoning value from the main Ethereum network, diluting its value proposition.

Despite the gloom, some crypto traders remain “insanely bullish” on ETH, viewing it as the “best opportunity in the market.” However, even bullish institutions like Standard Chartered have revised their end-of-2025 ETH price estimate from $10,000 to $4,000, reflecting a more cautious outlook.

In the face of these challenges, Adam Cochran has suggested Based Rollups as a potential solution. By altering the incentive structures to benefit the main network, this concept could help Ethereum claw back some of the liquidity and revenue lost to Layer-2 networks. It’s a glimmer of hope that could steer Ethereum towards a more sustainable future.

Meanwhile, other major cryptocurrencies like Solana, BSC, Bitcoin, and Tron are navigating different waters. For instance, BSC has seen a TVL increase of 16.68% year-to-date, highlighting the diverse dynamics within the DeFi space. This contrast shows that while Ethereum struggles, other networks are finding their footing.

The future of Ethereum remains uncertain, with bearish sentiments and bullish optimism coexisting. As the crypto landscape evolves, Ethereum’s ability to adapt and innovate will be crucial in determining its fate. Whether it can rise above the current challenges or succumb to them will depend on its response to the issues at hand.

Key Takeaways and Questions

• What is the current risk faced by Ethereum whales on MakerDAO?

  The risk is that their positions will be liquidated if ETH’s price falls below $1,800, potentially resulting in a $238 million loss.

• How has the decline in ETH’s value affected the DeFi sector?

  The decline has led to a significant drop in Total Value Locked (TVL) across various DeFi protocols, from $66 billion to $50 billion.

• What are the broader economic factors contributing to the crypto market’s struggles?

  Rising US inflation and President Trump’s tariffs have contributed to the downturn in the crypto market.

• What are the concerns raised by analysts about Ethereum’s future?

  Analysts are concerned about the impact of Layer-2 networks and token proliferation on ETH’s value proposition, with some suggesting that Ethereum’s investment value is “dead.”

• How have specific DeFi protocols been affected by ETH’s price decline?

  Among the top ten protocols, only Aave and Sky (formerly MakerDAO) have seen TVL increases, while others like Lido, EigenLayer, Ethena, Uniswap, and Pendle have experienced declines.