A cryptocurrency whale made a complex leverage trading operation using Ethereum (ETH) as collateral to borrow $34 million in USDC. The borrowed amount landed in a Binance address, likely to invest in cryptocurrencies, which signals a bullish bias moving forward.
According to a Lookonchain post on X, the whale withdrew 30,000 ETH from Bitifinex on June 30, worth $101.7 million. Right after, the address 0xEd0C deposited 20,000 ETH in two batches of 10,000 ETH to the Spark protocol.
Notably, this total deposit represents collateral with a nominal value of $67.8 million used to borrow 34 million DAI. DAI is a decentralized, over-collateralized stablecoin pegged at 1:1 to the U.S. dollar.
The whale then used the $34 million worth of DAI to get the same amount of Circle USD (USDC) on the 1inch (1INCH) decentralized exchange, which 0xEd0C deposited to a Binance-controlled address.
A whale withdrew 30K $ETH($101.7M) from #Bitfinex 1 hour ago and deposited 20K $ETH ($67.8M) into #Spark.
Then he borrowed 34M $DAI from #Spark, swapped it to 34M $USDC, and deposited it into #Binance.
He currently has 30,151 $ETH(102.33) deposited on #Spark and 52M $DAI… pic.twitter.com/XegfdU1na5
— Lookonchain (@lookonchain) June 30, 2024
How does leverage trading work on DeFi?
Overall, leverage trading in decentralized finance (DeFi) allows users to amplify their potential gains by borrowing funds without third-party exposure.
Essentially, crypto traders deposit collateral, such as ETH, into a lending protocol like Spark. They then borrow against this collateral, often in stablecoins like DAI or USDC. This borrowed amount can be used to increase their trading position, potentially multiplying profits.
However, leverage trading also magnifies risks. If the market moves against the trader’s position, they 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, potentially causing significant losses for the trader.
In this case, the whale deposited 20,000 ETH as collateral to borrow $34 million. Lookonchain reported a health rate of 1.63 over this address’s position, considering a total deposit of 30,151 ETH ($102.33 million) for a $52 million borrowed in DAI.
The bullish signal
This strategy suggests a bullish outlook, as borrowing USDC to deposit on an exchange often indicates plans to buy more crypto. Also, the trader likely believes ETH’s value will increase, outpacing the interest on the loan.
As technology improves, DeFi platforms offer unique opportunities for such large-scale operations. They provide permissionless access to leverage and liquidity without traditional intermediaries. Yet, 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 utilizing multiple protocols, they’ve positioned themselves for potential gains while navigating the inherent risks of leveraged trading.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk
