Decentralized credit protocol Maple recently announced that none of its platform users’ positions were liquidated during the significant price crashes on Feb. 2, resulting in no bad debt. This news comes as a relief to many users who were concerned about the impact of the market volatility on their positions.
During the tumultuous period, Maple reported that users deposited an impressive $10 million to reinforce their margins and avoid liquidation events. This proactive measure helped to safeguard users’ positions as over $10 billion worth of assets were liquidated in a single day, with Ethereum briefly dropping into the low $2,000 price range and other major cryptocurrencies experiencing declines of 10% to 30%.
Maple functions as a decentralized credit protocol where users deposit assets into a pool that serves as a credit line for institutions. According to data from rwa.xyz, Maple managed $2.5 billion in loans as of Feb. 7. The platform’s Blue Chip and High Yield Secured Lending products remained fully overcollateralized during the recent volatility, thanks to margin calls issued before collateral levels became critical.
The High Yield Secured pool saw $2 million in inflows during the massive liquidations on Feb. 2, demonstrating confidence in Maple’s stability and resilience. The platform’s Blue Chip Secured lending pool only accepts Bitcoin (BTC) and Ethereum (ETH) as collateral, held by qualified custodians. On the other hand, the High Yield Secured pool generates higher returns by underwriting loans backed by specific digital assets and reinvesting the collateral in staking or secured lending.
Syrup, a pool that combines both strategies to boost yields, issued margin calls to 35% of its loans during the recent market turmoil, leading to $5 million in new deposits. Borrowers also posted an additional $7.4 million in collateral and repaid $7.4 million in loans, further strengthening Maple’s loan book stability. As of Feb. 6, collateralization levels across pools averaged 165%.
In addition to Maple’s success during the market volatility, Aave, another prominent decentralized finance platform, processed $210 million in liquidations without incurring any additional bad debt. Aave’s liquidation mechanisms efficiently settled positions, with most liquidations occurring on the Ethereum main instance to minimize losses to the protocol. Despite the scale of the liquidations, Aave’s existing bad debt decreased by 2.7% due to the declining value of debt assets.
Overall, Maple and Aave’s performance during the recent market turbulence underscores the resilience and effectiveness of decentralized finance protocols in managing risk and ensuring the security of users’ assets. With robust mechanisms in place to handle market fluctuations, these platforms continue to provide innovative solutions for borrowing, lending, and earning yields in the fast-evolving cryptocurrency ecosystem.