CandleFocus

'High-Risk' Crypto Loans Surge to a Two-Year High of $55M

The total amount of high-risk loans in the decentralized lending market has reached its highest level in over two years, raising concerns about potential liquidation cascades and market volatility. These high-risk loans are defined as those within 5% of their liquidation price. If the value of the collateral falls by 5%, it will no longer cover the loan, triggering liquidation. IntoTheBlock, an analytics firm, reported that the total amount of high-risk loans rose to $55 million, the highest since June 2022. The surge in these loans can lead to a self-reinforced process of liquidations, lowering crypto prices and causing further liquidations, creating increased market turbulence. Bad debt resulting from these liquidations can negatively impact market liquidity and make it difficult to trade large orders at stable prices.

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