BlockBeats News, October 11th, Formula News founder Vida posted on social media, saying: “A while ago, a friend told me that there is currently a risk-free arbitrage opportunity, which is to do USDE flash loans on Binance, with an annualized interest rate of around 26%. His institutional friend turned 1 billion USDT capital into 5 billion USDE through flash loans on the Binance trading platform.”
Vida explained that this massive liquidation event was speculated to have occurred in a scenario of a significant drop in a market with low liquidity:
· The USDE flash loaner’s position was liquidated
· Leading to a low USDE price
· Causing a decrease in the collateralization capacity of USDE as the unified account collateral
· Triggering more liquidation of market makers’ positions collateralized with USDE
· Triggering the liquidation threshold of assets like BNSOL and WBETH which are accumulated yield assets.
Assets like BNSOL and WBETH, although having a high collateralization ratio, have their value entirely determined by the order book, and under the conditions at that time, no one went to provide support to maintain the peg, leading to a price collapse and further liquidations. It can be guessed that most likely some market makers with unified accounts also got liquidated, which is why many small coins experienced extremely volatile prices.
