Markets
Crypto Whale Borrows $34 Million for Bullish Leveraged Trade
A cryptocurrency Whale completed a complex leveraged trading operation using Ethereum (ETH) as collateral to borrow $34 million USDC. The borrowed amount landed in a Binance address, likely to invest in cryptocurrencieswhich signals a bullish bias moving forward.
According to a Lookonchain article on XThe whale withdrew 30,000 ETH from Bitifinex on June 30, worth $101.7 million. Right after, the address 0xEd0C I deposited 20,000 ETH in two batches of 10,000 ETH on the Spark protocol.
0xEd0C6079229E2d407672a117c22b62064f4a4312 transaction history. Source: Etherscan
It should be noted that this total deposit represents collateral with a face value of $67.8 million used to borrow $34 million. DAI. DAI is a decentralized and over-collateralized system stable part pegged 1:1 to the US dollar.
The whale then used the $34 million worth of DAI to obtain the same amount of Circle USD (USDC) on the 1inch (1 INCH) decentralized exchangethat 0xEd0C deposited to an address controlled by Binance.
How does leveraged trading work on DeFi?
Overall, leveraged trading in decentralized finance (Challenge) allows users to amplify their potential earnings by borrowing funds without third-party exposure.
Basically, cryptocurrency traders deposit collateral, like ETH, into a lending protocol like Spark. They then borrow against this collateral, often in the form of stablecoins like DAI or USDC. This borrowed amount can be used to increase their trading position, potentially multiplying profits.
However, leveraged trading also amplifies risks. If the market moves against the trader’s position, the trader may face liquidation. Liquidation occurs when the value of the collateral falls below a certain threshold. The protocol then sells the collateral to repay the loan, which can result in significant losses for the trader.
In this case, the whale posted 20,000 ETH as collateral to borrow $34 million. Lookonchain reported a health rating of 1.63 on this address’s position, considering a total deposit of 30,151 ETH ($102.33 million) for borrowing $52 million in DAI.
The bullish signal
This strategy suggests a bullish outlook, as borrowing USDC to deposit on an exchange often indicates plans to purchase more cryptocurrencies. Additionally, the trader likely believes that the value of ETH will increase, outpacing the interest on the loan.
As technology improves, DeFi platforms offer unique opportunities for large-scale trading. They provide permissionless access to leverage and liquidity without traditional intermediaries. However, traders must carefully monitor market conditions and their liquidation price to avoid substantial losses.
This whale’s actions demonstrate the complex strategies possible in DeFi. By using multiple protocols, they positioned themselves for potential gains while navigating the risks inherent in leveraged trading.
Disclaimer: The content of this site should not be considered investment advice. Investing is speculative. When you invest, your capital is at risk