A severe downturn in the cryptocurrency market has put a significant investor on the brink of liquidation. An investor active in the Maker protocol since 2021 was forced to deposit an additional 2,000 ETH (approximately $4 million) as collateral to avoid the liquidation of a $75 million DAI loan due to the plummeting price of Ethereum (ETH) 
$1,680. This action lowered the liquidation threshold from $1,932.08 to $1,874.98, but the volatility of ETH’s price did not fully eliminate the associated risk. Subsequently, the investor converted $1.5 million worth of USDT withdrawn from Binance to DAI coins, partially repaying the debt and reducing the liquidation threshold to $1,781. However, if ETH falls below $1,781, a penalty loss of $16.5 million would be unavoidable.
Last-Minute Move by a Crypto Whale
On-chain data indicates that the investor acted just one hour before the liquidation process was set to begin. With ETH dropping below $2,000, the collateral ratio of the loan position fell to 176%, but the addition of the 2,000 ETH and $1.5 million in DAI raised it back to 180%. Unfortunately, negative macroeconomic signals in the market continue to pressure ETH downward, including Trump’s tariff announcements and reactions to the White House’s crypto summit.
Before the liquidation window closed at 02:59, the investor exchanged USDT for DAI to partially settle the debt. While this move alleviated some collateral obligations, a $1 drop in ETH’s price brings the risk back into play. Experts emphasize that the investor must either completely pay off the debt or significantly increase collateral to ensure complete safety.
Maker Protocol and the Liquidation Process
MakerDAO’s liquidation mechanism allows users a one-hour intervention window. This means that if ETH’s price falls below $1,781 according to hourly updated oracles, the position will be automatically liquidated. Should this scenario occur, a 13% penalty fee ($16.5 million) will be triggered, and the collateral will be auctioned off.
A former Maker employee noted that due to the system’s “delayed price updates,” users have a chance to intervene even during sudden crashes. However, despite this intervention opportunity, a prolonged downward trend in ETH could create a domino effect affecting the entire cryptocurrency market. High-risk products like Maker’s ETH-C vault operate with a minimum collateral ratio of 170%, suggesting that similar scenarios could repeat during volatile periods.
