Ethereum Price Crash Makes The Entire DeFi System Disorganized

The Ethereum price crash makes the entire DeFi ecosystem disorganized while the rest of the market has not fared well and the prices of other altcoins lost more than 50 percent of their value. In our Ethereum news today, we find out more about the current situation.

This was a stress-test for the entire DeFi ecosystem since the market is facing some of the worst days in history. It seems that the DeFi system failed the test and crashed under heavy pressure of the Ethereum Price Crash, dropping by more than 50 percent in one day to reach 40 percent all in one day time. While all of the eyes were on Bitcoin yesterday during the dramatic price swings, it became known on Twitter that DeFi had come under intense pressure due to the market volatility.

MakerDAO, an Ethereum-based protocol responsible for the DAI Stablecoin, allows users to get loans in the stablecoin by collateralizing ETH in a decentralized manner, enforced a shutdown as millions of dollars worth of loans got liquidated. What eventually happened was the large retracement in the price of the collateralizing assets and some of the Collateralized debt positions had to liquidate in order to protect the system. The problem according to an ETH entrepreneur Marc Zeller was that there was a glitch in the price system of the Maker users where the price given by the oracles was not aligned with the Ethereum market price.

According to other analyses by Arcane Assets CIO Eric Wall, one user managed to leverage the difference by withdrawing a large amount of crypto from the ecosystem without having to pay their dues, which means that there were some of the DAIs that were not collateralized. The situation is changing but MakerDAO plans to auction some of the native tokens while also having a community call to try and figure out what will happen next with the platform.
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Many were worried about the future of DeFi after what seemed to be a disaster as the managing partner of Multicoin Capital Tushar Jain wrote that he was ‘’worried that DeFi cannot be sustainable if the whole ecosystem could get liquidated in less than 24 hours. That was a real risk today.’’