The volume of outstanding high-risk loans in the decentralized finance (DeFi) sector has exceeded $5 million, rebounding after the potential liquidation threat of Curve founder Mikhail Egorov’s $100 million position.

High-risk DeFi loans are surging as market sentiment drives demand for leverage.

However, with the U.S. elections just concluded, heightened volatility remains a concern. Large events like this can create a lot of volatility, potentially putting pressure on leveraged positions. pic.twitter.com/KIrOwRRrMr
— IntoTheBlock (@intotheblock) November 7, 2024

This figure marks the highest level since July 2022. For instance, the Benqi platform has issued over $115 million in loans, with $5 million classified as “high-risk.”

The catalyst for this surge has been the cryptocurrency market rally, fueled by optimism surrounding the U.S. elections. High-risk loans are collateralized with volatile assets and sit within 5% of their liquidation threshold. Traders use them to profit from potential price swings.

High-risk DeFi loans are surging as market sentiment drives demand for leverage.

However, with the U.S. elections just concluded, heightened volatility remains a concern. Large events like this can create a lot of volatility, potentially putting pressure on leveraged positions. pic.twitter.com/KIrOwRRrMr
— IntoTheBlock (@intotheblock) November 7, 2024

In an interview with Cointelegraph, Evaa Protocol co-founder Alexander Sudeykin noted that mass liquidations of high-risk loans could impact the broader crypto market.

“However, I don’t believe the worst-case scenario would have a significant effect. Over the past few years, DeFi has matured considerably, particularly among major protocols that have implemented more advanced risk management practices. Increased resilience can mitigate the impact of sudden downturns,” the expert clarified.

Sudeykin highlighted his protocol’s measures, including caps on maximum asset volumes, isolated pools, and other safeguards.

In related news, in November, Coinbase launched wrapped Bitcoin on the Solana network, dubbed cbBTC. Earlier in September, the exchange introduced its own version of digital gold in the form of an ERC-20 token.