Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.
The total amount of crypto-collateralized loans within 5% of their liquidation price is at its highest in over two years, according to IntoTheBlock.
The decentralized lending market is booming, with"high-risk" loans surging to over two-year highs, sparking concerns of liquidation cascades and volatility.The total amount of high-risk loans, defined as those within 5% of their liquidation price, rose to $55 million Wednesday, reaching the highest since June 2022, according to data tracked by analytics firm
Thus, the surge in these risky loans is noteworthy as it can lead to a liquidation cascade. In this self-reinforced process, a series of liquidations happen quickly, lowering crypto prices. That, in turn, causes further liquidations and increased market turbulence.
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