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whale has put up $170M of SOL and borrowed $100M of USD. that USD was supplied by other people on Solend who expect to be repaid. “liquidation” is a way to ensu

whale has put up $170M of SOL and borrowed $100M of USD. that USD was supplied by other people on Solend who expect to be repaid. “liquidation” is a way to ensure those lenders are repaid: if the borrower no longer has enough collateral to be incentivized to pay back the loan — or rather before that happens — liquidators will recover the lenders’ money by seizing the borrower’s collateral, selling it on the market, and returning the USD proceeds to the lenders. the worry about SOL price drop is: can this $170M of SOL really be sold to make the lenders whole of their $100M USD? or will SOL significantly drop as that trade is executed and the lenders can only recover (say) half that? most lending platforms place a cap on the total amount of each type of collateral they’ll accept — in large part to protect against these liquidation scenarios. it looks like there’s worry that Solend was too lax with their cap.

UncleEntity 4y ago
Is that literally the case though? Or is it that if the price crumbles the whale will be able to pay back the loan for pennies on the dollar because they need to repay in the crashed tokens? One way was a really good bet and having their tokens confiscated to ensure they don’t benefit is probably outright fraud while the other way is just a bankruptcy where confiscating their tokens is probably outright fraud unless they have a previous contractual agreement which states it is permissible. Hard to tell what is happening in the cryptocurrency space because too many people have an agenda to just state the facts. —edit— Or a loan which may or may not need to be liquidated at some future point and they seized the collateral “just in case” like pre-crime.