Crypto Whale Loses $4.5 Million in Risky Ethereum ($ETH) Leverage Play

A significant investor in cryptocurrencies, holding over $4.5 million worth of Ethereum ($ETH), suffered losses after trying to increase their profits through a strategy known as “leveraging” their long position in Ethereum twice. Unfortunately, the value of Ethereum decreased, requiring them to pay back debts on a decentralized platform.

Based on data from cryptocurrency analysis platform Lookonchain, a large investor (referred to as a whale) initially suffered a loss of approximately $500,000 after borrowing USDT through Compound, a decentralized lending system. Subsequently, the whale was required to repay the funds obtained for purchasing more ETH.

After making an unsuccessful initial try, the trader chose to proceed by transferring Ethereum (ETH) funds from Binance, a well-known cryptocurrency exchange, for utilization in a lending protocol. With the borrowed US Dollar Tether (USDT), they then purchased additional ETH, thereby amplifying their position within the cryptocurrency market.

The information about the whale’s actions shows that they had to sell their entire 10,701 ETH stake, equivalent to around $33 million at the time, through Binance to pay off debts from a previous unsuccessful investment in Ethereum. This action resulted in an extra loss of over $4 million.

Two hours ago, this whale on Binance disposed of all his $ETH tokens, amounting to 10,701 units and approximately $33M in value, to settle a debt. Unfortunately, the sale cost him over $4M more.— Lookonchain (@lookonchain) April 16, 2024

On Compound, you need to provide collateral worth more than the loan amount when borrowing. However, due to the volatile nature of cryptocurrencies, the value of the collateral may drop below the loan value, leading to a potential liquidation in the crypto world.

Over the last seven days, Ethereum’s price decreased by over 14%, joining a broader market slump during which equities also dropped significantly. This downturn was triggered by escalating tensions in the Middle East: Iran launched drones and missiles towards Israel, and Israel vowed to respond.

At present, Ethereum is being traded for approximately $3,000 per token. This is a decrease from its peak of around $4,000 per token reached earlier in the month, yet it represents an increase of over 44% compared to its price during the same period last year.

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2024-04-18 05:48