Against the background of market correction, the volume of liquidations in the Venus DeFi landing protocol powered by Binance Smart Chain (BSC) reached $ 200 million.
Please read our Venus XVS Liquidation Incident report. All funds are safe and the protocol is safe. Thank youhttps://t.co/27x75gc3q8
– Venus (@VenusProtocol) May 19, 2021
Shortly before the cascade of liquidations, the native XVS token showed significant growth, one of the main drivers of which was the Venus Reward Token (VRT) airdrop.
$ VRT is now being distributed 🎉 #BSC https://t.co/L4uwQVPGSZ
– Venus (@VenusProtocol) May 19, 2021
“There has been a significant jump in the price of XVS, driven by large market orders and expectations for the new VRT,” explained project founder Joselito Lizarondo. “With the price rising, traders have deposited and borrowed more funds to continue buying XVS.”\
According to him, many market participants have used high leverage to improve capital efficiency. With the onset of a volatile correction, there was a cascade of liquidations in the XVS market.
The chart below shows the jump in the price of the Venus token from below $ 80 to $ 140 on May 18. This enabled users to borrow more funds using XVS as collateral.
4-hour XVS / USDT chart from TradingView.
“Venus Protocol liquidations are no different than when users open longs on margin. You use the collateral to borrow more funds to increase the position, which you can reuse and adjust, ”said Lizarondo.
The Venus founder added that no protocol glitches occurred.
The Block researcher Igor Igamberdiev expressed a different point of view – the price of XVS was manipulated.
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Today we have witnessed the manipulation of XVS price — the governance token of Venus Protocol on BSC.
This incident resulted in $200M+ DeFi liquidations and a $100M+ of protocol bad debt.
As usual, let’s analyze this situation below👇 pic.twitter.com/pAnjqHI25T
– Igor Igamberdiev (@FrankResearcher) May 19, 2021
The analyst referred to a tweet from journalist Colin Wu. It says that a certain user borrowed 4,100 BTC and 9,600 ETH, generating $ 100 million in bad debt. According to Wu, a similar incident has already happened on the Venus platform, albeit on a smaller scale.
Igamberdiev recalled that an incident of a comparable scale occurred in February 2021 on the Ethereum landing service Compound. At that time, the debt denominated in DAI grew by 30%, which caused the liquidation of positions in significantly cheaper cryptoassets. The service’s oracle used Coinbase to get pricing data.
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The previous record for liquidation volume was held by Compound after the DAI price oracle incident ($88M).
Back then, Compound Open Price Feed was heavily criticized by the Chainlink community, but virtually the same manipulation was just done even with Chainlink. pic.twitter.com/boiYvcLJv9
– Igor Igamberdiev (@FrankResearcher) May 19, 2021
At the time of writing, Venus is the leader in Locked Funds (TVL) among projects powered by Binance Smart Chain. The combined indicator of the BSC ecosystem is $ 35 billion.
Data: Defistation.
In April, the TVL of the Venus project exceeded $ 10 billion.
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