In February, the Ethereum lending market experienced its largest liquidation event in 12 months, with nearly $500 million being liquidated

In February, the Ethereum lending market experienced its most severe liquidation event in 12 months, with nearly $500 million worth of collateral being liquidated. This was the second highest monthly liquidation amount in DeFi history, only behind the liquidation amount during the market crash in May 2021, when the liquidation amount reached $67 billion. As expected, the surge in liquidations occurred simultaneously with a downturn across the entire market, leading to a significant decrease in total cryptocurrency market value and triggering numerous forced closures.

Most of these liquidations took place on two largest lending platforms Aave and Compound which handled most of February's volume. The platform's clearing mechanism allows third-party clearers to repay part of insolvent loans and acquire borrowers' collateral at discounted prices; discounts usually range between 5% and 15%, depending on assets thus providing efficient adjustment incentives for markets.