MakerDAO stopped “pumping money” for Aave for fear of risks from Celsius

MakerDAO stopped “pumping money” for Aave for fear of risks from Celsius

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2022-06-17 04:26:41

MakerDAO has just decided to stop pumping money into Aave through its D3M partnership product, in order to minimize the risk if Celsius defaults and the price of stETH could plummet.

MakerDAO stopped “pumping money” for Aave for fear of risks from Celsius

MakerDAO cuts the supply of DAI to Aave

MakerDAO has just voted to approve a proposal to stop lending to Aave stablecoin DAI in the form of unsecured assets. The move means that Maker is looking to gradually reduce its exposure to the recent stETH crash and control the risk for stablecoin DAI.

Accordingly, the proposal has been approved by the majority of votes and will officially go into operation at 4 am on June 18. However, the D3M delay is said by Maker to be “temporary” amid the current volatility.

Earlier on June 14, a DAO proposal suggested that Maker should delay lending Aave DAI through the Direct Deposit Module (D3M) mechanism because Celsius had previously borrowed 100 million DAI collateralized by stETH.

Suggested writing:

“The reason we believe the risk is so great is because of the 200 million DAI being borrowed on Aave v2, 100 million of that is in Celsius and is largely collateralized in stETH.”

D3M is a collaborative product between Maker and Aave. This is a solution to help Maker control interest rates for DAI in lending pools on Aave (which often fluctuates according to users’ borrowing needs).

> See more: Will fixed-rate (fixed-rate) be the next trend of DeFi lending?

Also on June 14, Aave side proposed to stop lending ETH with stETH as collateral, in order to protect the platform against the risk of exchange rate bias. However, at the time of writing, this proposal was strongly opposed, with 90% of people voting in favor of approval.

In March 2020, a transaction delay on Ethereum also caused Maker to incur a large bad debt from DAI. After that, this organization had to launch an MKR auction to make up for the aforementioned difference.

> See more: MakerDAO auctions MKR tokens for the first time to pay off a bad debt of $4 million

The Situation of Celsius and the Three Arrows Capital

As of the morning of June 17, Celsius is still maintaining loan order 224.7 million DAI on Maker, collateralized with 23,962 WBTC (worth nearly $490 million). This order will be liquidated if BTC price drops to $13,601.

Vault borrows DAI on Celsius’s Aave on the morning of June 17, 2022

In addition, this unit is still borrow $303 million USDC and DAI stablecoins on Aave, collateralized with USD 292 million stETH, WBTC, WETH and LINK; together 200 million USD and DAI on Compoundcollateralized with USD 108 million WBTC and ETH.

Celsius Loan Order on Aave
Celsius Loan Order on Compound

On the evening of June 16, Celsius posted a notice to continue to reassure users that the company is doing everything to save the situation, committing to still reward users for depositing even while blocking deposits, withdrawals and transactions. translation, but still does not confirm the time to resume normal operation.

Financial regulators in 5 US states are said to be about to open an investigation into Celsius because of the recent incident.

In related developments, Three Arrows Capital on the morning of June 17 sold all of the remaining 19,600 stETH in its wallet, raising $ 19.5 million. Thus, since June 14, 3AC has sold a total of about 75,600 stETH.

The rate of stETH to ETH on Curve on the morning of June 17 is falling to 0.9367 at press time.

Movement of stETH/ETH on Curve for the last 72 hours, data taken from Dune Analytics at 08:30 AM on June 17, 2022

The BlockFi lending unit admitted to liquidating 3AC’s assets, Finblox announced to stop paying bonuses and impose withdrawal limits because of the influence of 3AC, Deribit and Avalanche denied having difficulties.

Synthetic CHK

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