A Solana whale generated problematic movements after putting the Solend DeFi protocol and the entire Solana space at risk.

A Solana Whale (SOL) created a controversial scene in the crypto space after putting decentralized finance (DeFi) protocol Solend at risk of critical insolvency. The whale also put the Solana space in danger, when it was approaching an exponentially chaotic multi-million dollar chain sale.

The situation started a few days ago, when an anonymous user of Solend, a Solana-focused crypto lending protocol, took out a $108 million loan on the USDC stable coin.

Settlement Risks

According to data from The Block, the loan got guaranteed for 5.7 million SOL, which registered USD 215 million and represented 95% of SOL’s housed funds in Solend’s main loan pool. It also accounted for 88% of USDC loans from that protocol.

However, with the price of SOL lingering below $25 amid a broader meltdown in the market, fears arose regarding a possible user margin call that would put Solend in danger. If the SOL token approached $22.30, the protocol would automatically liquidate up to 20% of the whale collateral.

According to the report, Solend’s team explained that an on-chain sell-off of that size would be dangerous. If the chain settlement goes ahead, Solend would be gathering bad debts due to an in-chain drop in SOL’s value.

According to Coindesk, protocol developers feared the multi-million dollar liquidation would flood Solana’s decentralized exchanges with pressure and even crash the network.

A Break for Solend

In search of solutions, the Solend team thought about seizing control of the wallet under the user’s control and manually liquidating it in an over-the-counter (OTC) deal. However, this proposal got rejected after the community dismissed the strategies due to disruption and deviation from decentralization.

On the other hand, the problems might get closer to being solved after the anonymous whale started moving funds on Tuesday. As highlighted by Solend’s Twitter, the whale moved at least $25 million of its debt to Mango Markets, another Solana-based network.

The team explained that the move happened due to Solend’s strategies to convince the user, identified as 3oSE by his wallet address, to extend his lending position through a second network.

According to The Block, with the whale moving a piece of its position to Mango Markets, Solend has been spared the full violence of a possible obliged liquidation. However, the crisis continues, as the Solend team highlights, bringing limited exposure to Solend but the trading position, and its possible liquidation, remains enacted.

By: Jenson Nuñez


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