Traders using decentralized finance (DeFi) protocols to bet on a USDC revival over the weekend are at risk of eight-figure liquidations if the stablecoin loses its $1 peg again this week.
According to data from DeFiLlama, there are $70.8 million in positions that can be liquidated between $1.00 and 90 cents, with two recently filled positions on interest protocol Compound being worth $20.7 million and $15.4 million, respectively.
USDC slumped to a low of 88 cents on Saturday after Circle, the company that issues the stablecoin, announced it had $3.3 billion tied up in troubled Silicon Valley Bank (SVB).
Circle revealed Sunday the $3.3 billion would be available at U.S. banks on Monday, quelling fears over a potential suspension in redemptions. Circle has a facility that allows users to redeem one USDC token for one U.S. dollar.
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While the immediate panic appears to be over with USDC regaining its peg on Monday, the first of two Compound positions worth $20.4 million will be liquidated if USDC hits 99 cents; the price point for the other position is at 93 cents.
Liquidations on Compound occur when a user borrows an asset and the value of the borrowed assets become greater than collateral. In this case, users can borrow other crypto assets – such as other stablecoins – by using USDC as collateral.