The following is a guest post and analysis by Vincent Maliepaard, marketing director at Intothlock.
Defi is aged in a complex web of credit markets, stablecoin -ecosystems and liquidity pools. Although this growth brings a wide range of opportunities, new forms of risk can suddenly arise and require a considerable expertise to navigate effectively.
The growing complexity and volatility of Defi -markets
The Defi market has grown considerably in recent years and has currently locked around $ 88 billion in total value. However, the space is also fragmented, with hundreds of Defi protocols in different chains, some with strong user bases and a good track record and others with more new designs. This complexity requires a well -thought -out framework for risk management that considered the most common economic risk in various ways. To help you in the right mindset, let’s view a few major risk events that can occur.
- Sudden liquidity crunches: In times of market stress, money lenders often hurry to withdraw money, causing the use of the loan pools to rise. In March 2023, for example, the DAI market on Aave reached nearly 100% use, forcing interest rates to step back to step back to seduce repayments and new deposits – a mechanism that hardly a liquidity crisis averted. Without such an intervention, users who stay in the swimming pool may not have been able to withdraw the liquidity dried.
- Stablecoin Depegs: Stablecoins can Loss their pin With little warning, sending shock waves through markets. A remarkable case took place on April 2, 2025, when First Digital USD (FDUSD) – normally confirmed 1: 1 in the dollar – dropped to $ 0.93 After accusations of insolvency against his issue. Such events in the depeg eroding not only trust, but also threaten protocols or liquidity pools that trust that stablecoin (eg causing imbalance in curve poles and panic developments).
- Cascading Liquidations: A competitive drop in a large asset can activate liquidations for chain reaction on Defi-credit platforms. Falling prices force lifting tree positions to relax, which can further suppress prices and liquidate even more loans in a vicious circle. For example, the “Black Thursday” crash of 2020, where a single decrease in the ETH of 50% led to a wave of liquidations and even Protocol Insolventions.
These examples show how quickly things can go wrong if you are not on top of a wide range of risk tricks that are relevant to your positions. Sudden liquidity shortages, PEG pauses and mass -reading emphasize the need for Continuous, in -depth risk monitoring. In fast -moving markets, Timing is everything – By the time an average investor responds to Twitter rumors or price charts, the damage can already be done.
Risk of the start of an Aave spotting
Aave, one of the largest money markets in Defi, is an important protocol to look at in determining potential risks in the market. If you are an institutional investor in Defi, chances are that you have deployed capital in the protocol. But even if you are not used in Aave, the strong position of the protocol can be important in looking out potential risk events in the wider market. Let’s take a practical example of how you would pay attention to a risk.
High risk loan warnings on Aave
We can categorize every loan on Aave by a health factor (based on collateral versus debts); When that health factor is approaching 1.0 (the liquidation threshold), the loan runs a high risk of being liquidated.
A sudden increase in loans with a high risk can be the result of extreme price movements, which means that the collateral in the loans falls. If this is significant enough, it can force liquidations and even create step -by -step liquidations as stated earlier. Continuous monitoring of the amount of loans with a high risk is somewhat impractical, but nevertheless essential. Tools such as Intotheblock’s risky Can automatically help these conditions spot, as shown in the example below.
Looking at liquidity flows
Another important signal on Aave is large movements of assets in or out of the protocol. Peaks in liquidity flows, in particular in outfows, can indicate risk conditions. For example, a major withdrawal of Weth from Aave can suggest that a whale draws, perhaps out of concern about market volatility or uses elsewhere.
This sudden outflow can tighten the available liquidity on an Aave. If a lot of Weth is disabled, there is less liquidity to borrow, and the use of the remaining WETH can shoot, so that the interest rates are higher.
Conversely, an increase in WETH deposits can temporarily stimulate the liquidity of Aave and indicate that large players sign up to borrow or gave them collateral for borrowing.
Looking at liquidity flows
Another important signal on Aave is large movements of assets in or out of the protocol. Peaks in liquidity flows, in particular in outfows, can indicate risk conditions. For example, a major withdrawal of Weth from Aave can suggest that a whale draws, perhaps out of concern about market volatility or uses elsewhere.
This sudden outflow can tighten the available liquidity on an Aave. If a lot of Weth is disabled, there is less liquidity to borrow, and the use of the remaining WETH can shoot, so that the interest rates are higher.
Conversely, an increase in WETH deposits can temporarily stimulate the liquidity of Aave and indicate that large players sign up to borrow or gave them collateral for borrowing.
Both scenarios have implications: a reduction in liquidity increases the risk of higher slipper or inability to withdraw to others, while a large inflow can precede increased loans (and leverage in the system).
Curve: Depeg alerts and market depth changes for Stablecoin -Pools
Another leading Defi protocol is curve. Curve is the backbone of the Stablecoin survey in Defi, the hosting of Polish where users trade and use stablecoins and other linked assets. Due to the design, Curve -Pools stable Swappools are intended to keep assets on equal value, which immediately makes a depeg event or imbalance. Risk monitoring on Curve focuses on PEG stability and market depth: are the assets in the swimming pool essentially their expected value and is there sufficient liquidity on each side of the swimming pool?
Depeg risks
When a token drifts in a curve pool from the intended PEG, LPS are often the first to feel the impact. A small price deviation can quickly be blamed in an imbalance in the pool – the depered asset floods the swimming pool as others leave, so that LPs have the risky side.
Recent events such as FDUSD Depeg on 2 April 2025 emphasize the importance of rapid detection. As the redemption struck and rumors spread, the Fdusd-heavy curve-poles is crooked. LPS did not caught the height of the fanciers loss of confronted with increasing assembly and poor exit -liquidity.
Early warnings that marked the initial drift (eg Fdusd <$ 0.98) would have given LPS time to close or cover it.
And they are not just Fiat stables. Assembly tokens such as SDPendle have also demonstrated dislocations in Curve. When these wraps slip into price versus their underlying assets, their share in Polish Ballon, a signal that the LP risk rises quickly.
Liquidity depth as a signal
Curve risk is not only about the price, it is also about depth. When the liquidity in a swimming pool is thin, slippage worsens and the ability to exchange is limited. It is therefore crucial to pay attention to sudden shifts in the liquidity of the swimming pool. There are a number of reasons why you may see a sudden liquidity shift. The most obvious answer is that market events, such as extreme price movements, cause uncertainty, so that people withdraw their liquidity.
A often less investigated factor is that the liquidity of the swimming pool can consist of only a few large providers, which means that only a few retreating entities can considerably change the market depth, which means you get the risk.
For funds that manage liquidity on curve, real -time warnings that combine large transactions with depth changes are crucial. They offer an opportunity to leave, to balance again or even use capital to stabilize the pin, Before catching up the rest of the market.
Whale concentration: Large players moving markets
A recurring theme in the above discussions is the great influence of whale investors, entities or addresses that control very large positions. Whale behavior can move markets or deform the liquidity, precisely because of their scale.
Analytics on-chain reveals this “whale concentration” risks by marking Polish where a few large lenders dominate. If three approaches that deliver the liquidity of a half -swimming pool, that swimming pool is vulnerable: the first whale can lock anyone until fresh capital arrives or forcing high rates to repay borrowers.
