For the same market downturn, the damage looks vastly different across the two markets.
Data published by Aave shows that borrowers experienced around $39 million in liquidations over the past two days. During the same period, liquidations on the derivatives side exceeded $2.1 billion, affecting more than 330,000 people.
That’s a fiftyfold difference.
Liquidations in on-chain collateralized lending are cushioned by collateral ratios and are executed gradually only after prices fall below a threshold. On the derivatives side, once margin is wiped out, the loss is realized all at once, with no steps in between. The price is the same, but the way it is borne is completely different.
The executive who published this data also cautioned that liquidation amounts are not the same as losses for lenders. Bad debt in collateralized lending has to pass through several layers—collateral haircuts, auction slippage, and reserve absorption—before it can break through. Forced liquidations, by contrast, are completed in seconds.
One is a slow-moving variable; the other, an instantaneous event. In market structure, the most fragile point is often farthest from the ledger.
$AAVE $BTC
#DeFi #MarketStructure
Data published by Aave shows that borrowers experienced around $39 million in liquidations over the past two days. During the same period, liquidations on the derivatives side exceeded $2.1 billion, affecting more than 330,000 people.
That’s a fiftyfold difference.
Liquidations in on-chain collateralized lending are cushioned by collateral ratios and are executed gradually only after prices fall below a threshold. On the derivatives side, once margin is wiped out, the loss is realized all at once, with no steps in between. The price is the same, but the way it is borne is completely different.
The executive who published this data also cautioned that liquidation amounts are not the same as losses for lenders. Bad debt in collateralized lending has to pass through several layers—collateral haircuts, auction slippage, and reserve absorption—before it can break through. Forced liquidations, by contrast, are completed in seconds.
One is a slow-moving variable; the other, an instantaneous event. In market structure, the most fragile point is often farthest from the ledger.
$AAVE $BTC
#DeFi #MarketStructure
