DeFi Giant MakerDAO Braces for Celsius Liquidation as stETH Crashes


MakerDAO said on Thursday that it would disable direct deposits with its counterpart Aave due to the latter’s high exposure to a potential Celsius selloff.

The move was purchased in a governance proposal which has been approved by the MakerDAO community and is scheduled to run on June 17.

MakerDAO, which is the largest DeFi platform by total value locked (TVL), said the proposal was aimed at reducing a potential risk from Aave’s exposure to beleaguered crypto lender Celsius.

Celsius recently suspended withdrawals due to a liquidity crisis stemming from a drop in Lido-Staked Ethereum (stETH) prices.

MakerDAO sees Celsius risk

Celsius borrowed about $100 million of the $200 million loaned on the Aave-Maker portal. The loan is secured by stETH and is denominated in DAI stablecoin.

The loan has a proposed liquidation threshold of 90%. A recent drop in stETH prices has brought the token dangerously close to trading at 90% of Ethereum prices.

The protocol fears that if they keep the account active, it is potentially risky for the MakerDAO due to the liquidation conditions.

DAI could also face a possible depeg if Celsius’ position were to be liquidated.

With general sentiment now expecting Celsius to go bankrupt, Aave and MakerDAO are at high risk.

ETH, stETH rift widens

stETH is currently trading at 0.93 Ethereum, at $1,060.52. Its recent depeg was initially triggered by top holder Alameda Research unloading all of its tokens.

Although the token has no direct impact on Ethereum prices, its use as collateral on DeFi platforms has threatened several large holders, including Celsius and hedge fund Three Arrows Capital, with liquidations.

Several positions have already been liquidated, causing Ethereum prices to drop nearly 40% this week.

MakerDAO already has exposure to Celsius through a $500 million position in Wrapped Bitcoin. If the position is liquidated, Bitcoin prices would see a major dump in the open market.

Bitcoin is currently trading at $21,200. It needs to drop to around $16,000 to liquidate Celsius’ position on MakerDAO.

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