Small 3% Token Swing Causes $36M in Ethereum DeFi Liquidations

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A cascading liquidation event on Ethereum's DeFi ecosystem wiped out $36 million in positions following a modest 3% token price movement. A single wallet made large purchases of a yield token, which in turn pushed down the price of its paired principal token. This price decline was sufficient to breach collateral thresholds for multiple borrowers who had used the principal token as backing for their loans. The incident highlights how concentrated buying activity in thinly traded DeFi tokens can trigger outsized consequences across interconnected lending protocols.

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