DeFi Protocols Show Resilience During Market Crash, Aave Processes $300M in Liquidations

DeFi protocols demonstrated resilience during this week's market crash, with Aave facing its largest liquidations ever amounting to $300 million on Ethereum mainnet.

DeFi protocols showed resilience during the recent market crash, with Aave facing its largest liquidations ever. Most of the liquidations occurred from stablecoin loans against wstETH collateral, IntoTheBlock reported.

Despite ETH crashing by up to 25% within a week, liquidations were successfully executed, rebalancing the protocol and contributing $6 million in profits to the Aave DAO.

The settlement of hundreds of millions in liquidations occurred without relying on a central point of failure, all executed automatically by smart contracts.

Liquid restaking tokens (LRTs) and yield-bearing stablecoins experienced brief deviations from their pegs. EtherFi’s eETH, the largest LRT by market cap, slipped by up to 2% during Monday’s crash but recovered within six hours. Non-redeemable LRTs faced steeper discounts but also recovered most of the discount.

Ethena’s USDe maintained its peg to the dollar, with its supply decreasing by $100 million due to redemptions. The stablecoin did not depeg by more than 0.5% despite the market volatility.

Overall, both new and established decentralized finance (DeFi) protocols successfully weathered the macro storm, demonstrating the industry’s ability to withstand harsh conditions without external interference.

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