BSC’s largest lending platform VENUS suffered a large liquidation, $100 million in bad debts who will underwrite?

Venus falls.

May 19 – VENUS, BSC’s largest lending platform, has been exposed to a large liquidation with extremely bad repercussions. According to the community feedback, there are several large investors holding more than 3 million XVS (Venus platform coins) in their hands, they spent tens of millions of dollars to pull the price of XVS from more than $70 to $144 in a short period of time last night, and then mortgaged XVS to borrow thousands of BTC and tens of thousands of ETH at the high price. then, the price of XVS quickly collapsed and XVS was liquidated, currently giving Venus platform with over $100 million in bad debt.

Timeline
At 22:00 on May 19, XVS was suddenly pulled up sharply without warning, and by 00:30 on May 19, the XVS price touched $144. Since then, within two and a half hours, XVS price basically doubled.

At 3:00 am on May 19, microblogging KOL Wang Dayou broke the news that venus had a large account that had mortgaged 2 million XVS at the high point of xvs price to lend out 4,100 large pancakes and 9,600 Ether, which was continuing to be liquidated. The xvs being liquidated thrown to the market may cause a cascading drop in the price of the coin. xvs price has been cut down from its high level.

At 4am on May 19, an investor nicknamed “Galaxy” broke the news that more than 2 million xvs borrowed from the above account had been liquidated to just over 1.4 million, and owed $83 million to Venus Systems.

BSC's largest lending platform VENUS suffered a large liquidation, 0 million in bad debts who will underwrite?

In addition to this, there is an account collateralized by XVS that has borrowed 12,986 ETH and has 470,000 xvs waiting to be liquidated with a debt of $15 million. The amount of bad debt on these two accounts is nearly $100 million. There are some other addresses that are unknown awaiting liquidation and it is not known how much bad debt.

BSC's largest lending platform VENUS suffered a large liquidation, 0 million in bad debts who will underwrite?

On May 19 at 8:30, Venus founder Joselito tweeted that the funds in the Venus system are safe and when some borrowers have insufficient collateral a liquidation will be executed by a liquidator and the profits from the liquidation will be transferred to the treasury. Joselito also cautioned against over-borrowing and to be aware of market conditions and volatile fluctuations to ensure that your positions are not liquidated.

The community explodes
The community blew up after the Venus liquidation. The points of contention were as follows.

1) With 10 million XVS in total circulation, is the 2 million XVS owned by the large investor or the project owner?

2) Venus raised the lending ratio of XVS from 60% to 80% not long ago, last night XVS was pulled up and then crashed, did someone take advantage of the loophole or did the project side do it intentionally?

3) Venus randomly added CAN as collateral at the beginning of the launch, resulting in 3000 BTC being borrowed short. Today, more than 4100 BTC and 22,000 ETH were borrowed, the same pit was stepped on twice, the project side’s ability is worrying.

For the first problem, there is no solution for now. However, a Twitter user with the nickname “Jordy Roelofs” provided an address that people who are interested can study: 0xEF044206Db68E40520BfA82D45419d498b4bc7Bf, with the help of Debank you can see that this address of XVS is heavily cleared.

Since it is currently not possible to go long and short XVS through contracts on centralized exchanges, and as the signs of a bearish market become more apparent, what do you do if you are a large XVS investor or project owner? There are two options: First, sell XVS directly to the market, as XVS liquidity is very poor, a large number of sales will smash the price of XVS through and will cause huge losses to yourself. Second, mortgage XVS for BTC and ETH, because the mortgage rate of XVS is 80%, even if the collateral is liquidated, the value of hard assets such as BTC and ETH in hand will lose 20% at most.

Also, thanks to last night’s pull, while pledging XVS out at the high point. Theoretically, the XVS pledge was exchanged for BTC and ETH at $144. With XVS falling to less than $50, the pledger not only did not lose money, but also made a big profit if he switched back to XVS now.

For the second question, risk control is the bottom line of the lending platform. Lending platforms have strict requirements for collateral collateral rates, and if the value of collateral fluctuates greatly and liquidity is poor, it cannot act as collateral. Otherwise, the market is highly volatile and highly susceptible to liquidation.

In mainstream lending platforms such as AAVE and Compound, each platform has a lending ratio of 65% and 60% for will own platform coins respectively. The market capitalization of these two assets is $7.5 billion and $3.2 billion, respectively, and the trading volume in the last 7 days is $2.5 billion and $300 million, respectively. The number of exchanges supporting AAVE and COMP is above 7.

XVS is 80% collateralized, with a market cap in circulation before today’s liquidation event of $1 billion or less and trading volume of $300 million or less, and only 3 exchanges supporting XVS. XVS has a lesser market cap than AAVE and COMP, about the same liquidity as COMP, and few exchanges supporting it. Such assets are far more volatile and normally have lower collateralization rates than the first two. Yet, Venus has passed a proposal to increase the collateralization rate of XVS from 60% to 80%. This is not a wise move. Today’s incident is also related to the XVS mortgage rate adjustment.

As for the third issue, Venus has acted in a way that hurts the community not once but twice. Last month, for example, it suddenly charged a fee, causing a large number of machine gun pool users to suffer losses. This time it was exploited again with XVS’s super high pledge rate, resulting in hundreds of millions of dollars of assets being taken away and not returned. A platform product made this way, if not because of Coinan’s own son, is estimated to have been eliminated.

Follow-up
For the more than $100 million in bad debts generated this time, some people suggested three ways to resolve them: First, Coinan takes over the bad debts. Second, the Venus project will sell coins to make up for the bad debt. Third, the Venus project owner should go to other platforms to borrow money to cover the debt. Either way, it is not easy to implement.

For investors, they should take out the BTC or ETH pledged on the platform in time to avoid not being able to cash out.

For BSC, the far-reaching effects of this incident are already visible. The situation is now very tense, Polygon (Matic) has locked up $11 billion in less than two months, Solana is also smashing money to run, the first-mover advantage established by BSC in the DeFi space is gradually being eroded, and funds are being lost significantly. Lending and DEX are the foundation of DeFi. As BSC’s largest lending platform, VENUS has been in trouble again and again, which will most likely bring down BSC. The BSC’s future is in jeopardy if it can either use this incident to completely overhaul Venus or re-support it or simply make a lending platform of its own.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/bscs-largest-lending-platform-venus-suffered-a-large-liquidation-100-million-in-bad-debts-who-will-underwrite/
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