A pair of high-value DeFi users are close to losing a combined $230 million as Ethereum’s price continues to fall.

The two users previously took out loans against large stashes of Ether tokens on MakerDAO, the DeFi protocol, which changed its name to Sky in August.

But over the past year, Ether has lost half its value. The once healthy loans are now at imminent risk of liquidation.

If the price of Ether drops below $1,787, MakerDAO will start selling the first whale’s Ether collateral to pay back their loans, adding more pressure on the already ailing crypto.

With Ether trading at $1,789 in mid-morning trading UK time, the whales must act quickly to either add more collateral or pay off their debt.

Otherwise, they will be saddled with huge losses.

Facing liquidation

The other whale, who recently topped up their collateral and paid off some of their debt, will still face liquidation if Ether drops to around $1,701.

The case highlights the programmatic nature of DeFi protocols, which don’t rely on any outside intervention to function.

It also demonstrates how DeFi’s transparency shows the marketplace potential market moving events.

MakerDAO lets users lock up volatile crypto, like Bitcoin or Ether, and creates and lends out its DAI stablecoin in return.

It is similar to DeFi lenders, like Aave. While Aave matches borrowers and lenders, MakerDAO acts as the sole lender on the protocol.

When MakerDAO users deposit collateral and borrow DAI, their positions are assigned a so-called Health Factor. This Health Factor represents the ratio between deposited collateral and borrowed DAI.

Health Factors

If a user’s Health Factor drops below one, MakerDAO automatically puts up their collateral for liquidation to ensure the protocol doesn’t accrue bad debt.

The two whales currently have Health Factors of 1.01 and 1.06 respectively, indicating their loans are close to liquidation.

When large DeFi liquidations occur they push the price of the collateral asset down, potentially triggering more liquidations and setting off a domino effect.

In February, this situation played out when President Donald Trump threatened 25% tariffs on imports from Canada and Mexico, only to postpone them a day later.

The resulting market jitters pushed Ether’s price down some 17% in a matter of hours.

Lenders on Aave were caught off guard, resulting in 700 users getting liquidated for $198 million.

Debt payment

Traders will be watching the two whales carefully over the coming days.

One whale has started to pay off their debt, indicating that they are aware of the situation and are actively trying to prevent themselves from being liquidated.

The other whale, however, hasn’t made an Ethereum transaction since March 11.

Tim Craig is Inside Solana’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.