Hi HODLers,
Today, I will shine some light on an event that happened last week on the Fantom Blockchain.
There are a lot of things to learn from it (the most important one is that leverage is evil).
This Degen goes by the name of Roosh in the Fantom community.
He deposited $50 million worth of FTM (roughly 59 million FTM tokens) on a DeFi protocol called Scream (Lending Platform) to take out a loan for two other tokens:
$SOLID, from the protocol-to-protocol crypto exchange called Solidex, this was the ve(3,3) exchange developed by Andre Cronje and his team before they quit.
$DEUS, the native token for a Swiss-army financial services platform called Deus Finance
The DeGen Trader got $37mn worth of this 2 tokens as you have to be over-colateralized on Scream (as for most of the DeFi Lending platforms).
What did he do next?
The whale then locked up his haul of those two smaller tokens in a four-year staking contract. These contracts allow you to get the best APR on these platforms and to participate in governance.
So, he’s now levered and illiquid.
And as any Altcoins $FTM took a nose-dive. Our trader is getting closer and closer to liquidation levels.
A $50mn liquidation is an important event and could have brought the network to his knees.
At some point, one of the members of the Deus Finance DAO lent Roosh $2 milllion to help prevent this.
It did not completely prevent the liquidation as 11mn $FTM got liquidated pushing the price of $FTM from $0.85 to $0.79.
Following this 1st liquidation, three other followed bringing the position to just around 18mn tokens.
As these trades to liquidate took place on-chain, gas fees skyrocketed
(Source: FTMscan)
Congestion of the network is having a cascading effect as FTM price goes down:
We could have ended in a death spiral!
But we didn't. Fantom just got slow and expensive for a while but kept running.
As our DeGen Fantom Whale put it in a funny tweet (I can't believe he is laughing after being liquidated)
Source:
How $50 Million in Loans Nearly Crashed Fantom
