Chaos Labs Market Alert - High Price Volatility and Liquidations - 04/13/2024

Markets are experiencing high volatility, which is leading to higher-than-usual liquidations across Aave deployments. We are closely monitoring the markets and will continue updating the community as necessary.


Aave V2 and V3 Liquidation Analaysis

In the past 48 hours, the cryptocurrency market has experienced a significant and rapid decline in asset prices. Both ETH and BTC saw substantial drops, with ETH plummeting by 17% and BTC by 12% from their recent peaks. Particularly noteworthy is the occurrence of 10% and 8.3% drops within just 30 minutes, reflecting the market’s volatility and the speed at which prices can fluctuate. This swift downturn also affected more volatile crypto assets, with many experiencing drops exceeding 20%. As a result, we summarize the recent liquidation events on Aave V2 and V3 to analyze the impact of this downturn on the protocol.

Aave v3


In the past 48 hours, liquidations totaling over $65 million took place, with a significant portion of $50 million, representing 77%, occurring within the last 24 hours alone. These liquidations involved 4,250 events across 1,858 unique accounts and were executed by 70 distinct liquidators.

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The majority of liquidations, amounting to 70.6% or $46.9 million, took place on the Ethereum Mainnet.

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58.8% of all liquidations involved wstETH or WETH as collateral assets. Additionally, assets like AAVE and WAVAX saw a relatively high number of liquidations, accounting for 9.8% ($6.52 million) and 9.2% ($6.13 million), respectively.

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As expected, 98.5% of debt assets were represented by various stablecoin iterations.

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Account Size Distribution

Below, we illustrate the distribution of accounts liquidated over the last 48 hours, categorized by the size of the positions involved. Notably, the largest account amounted to $8.11 million, comprising a wstETH-collateralized USDC debt position.

Minimum Size of Collateral Seized Number of Accounts Sum of Liquidated % of Total
100K 68 54.85M 84.3%
500K 18 43.4M 66.7%
1M 11 37.9M 58.3%
2.5M 7 31.9M 49%

Bad Debt

Aave V3 demonstrated exceptional efficiency over the last 48 hours, with minimal bad debt incurred, as evidenced in the chart below.

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Aave V2

Similar to V3, V2 experienced over $24M in liquidations over the past 48 hours, with $15M, or 62.5%, happening within the last 24 hours. This involved 334 liquidation events across 245 unique accounts, executed by 31 unique liquidators.

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Naturally, the vast majority of liquidations occurred on Ethereum Mainnet, accounting for 99% or $23.8M of the total.

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98.4% of the seized collateral originated from WETH and stETH.

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Surprisingly, however, the vast majority of debt asset liquidations stemmed from WBTC debt, as can be seen below.

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This originated from a single account that accounted for $21.9M in seized collateral, representing 91.25% of the total liquidation amount. Subsequently, this position has experienced a 30% reduction in value, leaving 17K ETH as collateral against 676 WBTC in debt.

Account Size Distribution

Minimum Size of Collateral Seized Number of Accounts Sum of Liquidated % of Total
50K 7 23.5M 97.9%
100K 5 23.4M 97.5%
500K 2 22.7M 94.5%
1M 1 21.9M 91.25%

Bad Debt

Aave V2 worked incredibly efficiently over the last 48 hours, incurring minimal bad debt, as can be seen in the chart below.

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Overall, the Aave protocol demonstrated robust performance over the past 48 hours, with the current parameterization proving effective during this stress test. We’ll remain vigilant and make necessary adjustments if faced with further extreme conditions.