A $181M ether bet gone bad is unfolding in real time
Why not just close out the loans? They can't, because the wallets are levered long. The owner has deposited ETH, borrowed stablecoins, bought more ETH, and deposited that to borrow more stablecoins to do it again. And so on., explained that you can see the wallet repeatedly taking stablecoins liked USDT and USDC, sending it to Binance, and withdrawing thousands of ethers.Traders lever long when they believe an asset's price will go higher.
They monitor prices of collateral to make sure each loans are properly collateralized. As soon as collateral becomes inadequate, these protocols automatically sell the underlying collateral on the open market. Whenever a borrower is liquidated, they take a painful haircut. When they have levered their position, that haircut is multiplied.that the largest position, on Aave, will be liquidated at a $982 ETH price. Uniwhales puts his liquidation price at $870.
ETH would need to fall $212, almost 20%, to trigger that lower price. That said, ETH has lost $212 in value since June 13, and almost $900 since June 1.It's speculated that these positions are owned by a major Chinese entrepreneur, but he might be operating alone, without the sophisticated risk modeling of trading firms and without the ability to watch positions around the clock.
That said, if the owner has liquid capital, they can always buy stablecoins and close out some of the dead positions, staving off liquidation.This might sound like another giant disaster ahead in the crypto world, but there's another way to view it: as a transparent marketplace, functioning as expected.
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