What factors affect the risk of lending positions on the whale chain

The risk of lending positions on the whale chain is affected by multiple factors such as market price fluctuations, liquidity conditions, lending interest rates, smart contract and platform risks, macroeconomic policies and its own trading strategies.

Apr 10, 2025 at 12:35 am

Here are some factors that will affect the risk of lending positions on the whale chain:

1. Market price fluctuations:

The decline in collateral prices will cause the collateral value to shrink and may trigger liquidation. For example, a whale borrowed 75.69 million DAI with 60,810 ETH. When the price of ETH falls, its position health will drop sharply and the risk of liquidation will increase significantly. On the other hand, if the cryptocurrency price of borrowed rises, whales may need to add collateral or be forced to close their positions. For example, whales short the ETH/BTC exchange rate. If the ETH/BTC exchange rate rises in reverse, they will face this situation.

2. Liquidity Status:

Large-scale selling of lending assets may cause market price slippage, and the actual average transaction price is lower than expected, affecting returns and position safety. The liquidity of collateral is also crucial. If market panic causes collateral to dean or negative premium, the collateral valuation will decline, which may bring positions close to the liquidation threshold.

3. Lending interest rates and capital costs:

Soaring lending interest rates will erode profits and increase capital costs. If the market conditions do not meet expectations for a long time, the accumulation of capital costs may exceed the potential returns, which puts whales under greater financial pressure.

4. Smart contract risk:

On-chain lending relies on smart contracts. If the smart contract has vulnerabilities, is attacked or fails, it may lead to capital losses or abnormal positions. For example, in 2021, CREAM Finance encountered a lightning loan attack due to its lack of real-time risk control model, resulting in risks on the platform.

5. Platform Risk:

The security, stability and compliance of the lending platform are crucial. The platform may face regulatory pressure, operational risks, hacker attacks and other problems, such as the FTX crash, which has caused huge losses to user assets. The platform's governance mechanism and risk control measures will also affect the risk of whales' positions. If the platform's risk control is not effective, such as Hyperliquid, because whales used position leverage and spot price linkage mechanism to create market abnormalities, exposing the platform's blind spots in trading behavior monitoring and position risk warning.

6. Macroeconomic and policy environment:

Changes in the macroeconomic situation, such as economic recession, inflation, etc., may affect the overall trend of the cryptocurrency market, and in turn affect the risks of lending positions on the whale chain. Uncertainty in policies and regulations will also have a significant impact on the cryptocurrency market. Some countries and regions have adopted restrictions or regulatory measures on cryptocurrencies, which may intensify market volatility and increase the risk of lending positions.

7. Whale's own trading strategy and risk management capabilities:

Trading strategy issues such as excessive leverage, unreasonable position allocation, misjudgment of market trends will increase position risk. For example, some giant whales still choose to continue to increase their positions in the face of losses, which instead increases the possibility of liquidation. At the same time, the lack of effective risk management measures, such as not setting up stop loss and stop profit, not conducting risk hedging, etc., will also make whales more vulnerable when facing market fluctuations.