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According to Lookonchain, an Ethereum whale has recently made a huge purchase of 25,674 ETH; however, this action could backfire if the price of ETH falls below a specific threshold, triggering a liquidation event.
From all indications, it appears that the whale obtained the said ETH from MakerDAO. This decentralized lending platform allows users to mint stablecoins (DAI) by locking up their crypto assets as collateral.
Lookonchain reports that the whale had spent 61 million DAI to buy 25,674 ETH; however, the whale shortly after sold 5,851 ETH out of this stash for a value of 14 million DAI, of which they made a profit of $99,000.
Although the whale had made some profits from this strategy, they also faced the risk of liquidation. If the ETH price goes below a certain level, the whale's collateral will be insufficient to cover their debt, and MakerDAO will automatically liquidate the ETH to reclaim the DAI.
Tomiwabold OlajideAccording to Lookonchain, if the price of ETH drops to $2,257, the said large ETH holder might be in danger of liquidation. This is because the healthy ratio on MakerDAO is presently as low as 1.03.
The Ethereum price is nearing this threshold, having fallen 3.56% in the last 24 hours to trade at $2,280, according to CoinMarketCap data. Since reaching a high of $2,448 on Dec. 28, the price of Ethereum has steadily dropped.
If today closes in red, ETH might be set to mark its third consecutive day of losses. The ETH price fell to intraday lows of $2,255 on Dec. 29, but at present, it has held up above the lows of $2,267 marked in today's trading session.
Wherever ETH price trends, the whale's fate is now related to the performance of ETH and the crypto market as a whole, which is currently declining as investors book profits through the end of 2023.
Yuri Molchan
Vladislav Sopov
Dan Burgin
Alex Dovbnya