Whales Generate Cash Using Borrowing Protocols!

A whale has borrowed $40 million USDT from the AAVE and COMPOUND platforms by collateralizing about 33000 Ethereums it owns in the past hours.

A whale has borrowed $40 million USDt from the AAVE and COMPOUND platforms by collateralizing about 33.000 $ETH it owns in the past hours.


First of all, to understand why the whale does this, we must first know what the borrowing system is. For example, let’s say you want to evaluate the ups and downs in the market, but you do not want to sell the assets you have or buy more. In this case, you will need cash. You can meet this cash by using certain borrowing platforms by showing your assets as collateral.

For example;

You have 1000 Ethereum. You have 2 options against the decrease in the market;
1. Selling your Ethereum,
2. Opening a short position with your cash.

If you do not want to sell your Ethereum, you can go to borrowing platforms such as Aave and Compound, show 1000 ETH coins as collateral, and borrow “1000 ETH worth” USDT. You open a short position with the cash you receive, and even if the value of your Ethereum decreases during the market decline, you earn money from your short position. However, since this cash you receive is a debt, you have to pay it at some point. Your payment will also be worth 1000 ETH. With the money you earn from short trading, you get “more” ETH at a lower value.

For example, let’s say you bought 1200 ETH. You have to pay 1000 ETH to the platform you borrowed, the remaining 200 ETH stays in your wallet and is yours. The same is true for long transactions. However, since the amount of debt you will pay in a market movement in the opposite direction of the position you opened will remain the same, the ETH values you will receive will increase so that you will receive less amount of ETH in number. Therefore, borrowing is very risky and generally requires high volume.

We can summarize the risky situation as follows;

You have 1000 Ethereum and you borrowed 1000 ETH worth of cash by going to the platforms and you think the market will drop. With the cash you received, you shorted Ethereum at $2000, but Ethereum increased to $2100. The worst scenario here is that you have $2000 x 1000 units = $2,000,000 in cash, while in the market boom scenario, you have 1000 x $2100 = $2,100,000 in debt. You have to pay the $100,000 difference yourself.

Now we can come to the borrowing of the whale; the Whale borrowed approximately $40 million in tether by collateralizing about 33,000 ETH in its hands and sending some of them to exchanges.

Whale made this transaction after the United States Securities and Exchange Commission (SEC) sued Binance Exchange. This may mean that investors who trade in large volumes are preparing for a big price movement.

In summary, Whale borrowed a total of $20 million in cash from the AAVE platform and $20 million in cash from the COMPOUND platform.

In Whale’s wallet, there is a total of $49 million in Ethereum (~$9M) and cash ($40M).

Hours after the whale borrowing, he transferred nearly $100 million in cash from another wallet to the Binance exchange. This transaction also strengthens the possibility that he is preparing for a significant price move.

Whale has also withdrawn 20,000 ($37 million) Ethereum from Binance and 4850 ($9 million) Ethereum from Coinbase. In addition, the altcoins $AXS, $SHIB, $COMP, $LINK, $CRV, $AAVE, and $RNDR, which are mentioned in the SEC minutes, were withdrawn from the exchanges to their own wallets.

Then, whale pulled $90 million worth of USDC assets on the Circle platform and transferred $85 million to Coinbase and $3.5 million to Binance.

You can view the wallets of the whale on Debank or Etherscan.

You can check out Lookonchain‘s research on the subject here.

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