The Binance Hacker’s $60 Million Aave Loan Is Close to Liquidation. What Would a Forced Sale Do to Ethereum?
A billion-dollar ETH position tied to the Binance hacker is sitting on a knife's edge in DeFi, and the mechanics of what happens next could surprise anyone expecting a crash.
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The Binance hacker’s Aave loan is nearing liquidation, and an Aave liquidation could force a buy of Ethereum (CRYPTO: ETH), as blockchain analytics firm Elliptic points out. This attacker holds approximately 519,104 ETH, valued at about $1.17 billion.
ETH trades at $2,255, up 1.0% in the last 24 hours after a 16.6% decline over the past month. The closing price on October 30 was $2,243, marking its lowest close in 30 days. So, what would happen to Ethereum if a forced sale occurs? The mechanics suggest that a liquidation would actually require someone to buy ETH.
This Aave Loan Gets Riskier When ETH Rises, So a Liquidation Means ETH Buying
Aave is a lending protocol that allows users to use cryptocurrencies as collateral to borrow other cryptocurrencies. According to Elliptic, the hacker deposited 59.9 million Tether (CRYPTO: USDT) tokens, a stablecoin tied to the U.S. dollar, and borrowed 19,762 ETH, totaling around $45 million.
A liquidation occurs when a loan is forcibly closed because the debt grows too large relative to the collateral backing it. In typical crypto loans, collateral is volatile, and debt is in stablecoins. When prices fall, these loans often get liquidated. However, this situation is different because the collateral is stable while the debt is in ETH.
This means that as ETH prices rise, the loan becomes riskier since each ETH owed costs more to repay.
When the loan exceeds its limit, a liquidator—typically a trader or an automated bot looking for distressed loans—will repay the ETH debt and take the USDT collateral at a discount, known as a liquidation bonus. To repay this debt, the liquidator must buy or already hold ETH, making a forced sale result in more ETH purchases, up to the 19,762 ETH owed by the hacker.
Aave Reopened Its Markets, and the Stress Spread Across DeFi
On October 30, Aave reopened all its markets after a temporary freeze. LlamaRisk, a risk management firm that advises Aave, explained that the reopening ran in four waves and cut about $3.7 billion in unused borrowing capacity from its older market and $130 million from its newer market.
LlamaRisk also kept the loan-to-value ratio at zero for nine assets, including USDT and WAVAX (the wrapped version of Avalanche (CRYPTO: AVAX)), meaning these tokens cannot be used to secure new loans. According to DefiLlama, the total value locked in DeFi applications fell by 5.3% to $84 billion on October 30, the lowest level since August 21.
Ethereum Trails Bitcoin With a $1.17 Billion Overhang
Ethereum currently has a 20-day simple moving average of $2,393—6.1% above its current price—and a 50-day average of $2,526, up 12%. This suggests sellers took control in October. A simple moving average averages each day’s closing price over a specific number of days. Ethereum remains 4.5% above its 200-day average of $2,159, which marks the long-term trend.
The nearest resistance level is $2,276, just 0.9% above its current price, where sellers have previously appeared. Fresh demand also seems weak, as spot Ethereum ETFs, which hold ETH directly for stock-market investors, lost $156 million on October 30. The hacker’s holdings represent about 22% of Ethereum’s trading volume in the past 24 hours, a figure that rose because trading activity was lower over the weekend.
In comparison, Bitcoin (CRYPTO: BTC) dropped by 8.6% over the same period. While we cannot attribute Ethereum’s struggles solely to the hacker’s activities, Solana (CRYPTO: SOL) and Avalanche both saw larger declines without a similar overhang.
Which Is the Bigger Threat to Ethereum, the Aave Liquidation or the 519,104 ETH Stack?
In our assessment, the hacker’s large ETH stash poses a greater threat to the market than the potential liquidation of the Aave loan. A forced sale could involve buying up to 19,762 ETH, worth around $45 million. However, the attacker’s entire ETH stack is worth about $1.17 billion.
The hacker also accepted a 12% to 26% loss to convert 434 million USDT into 160,451 ETH—shifting out of a stablecoin that could be frozen and into decentralized ETH.
Stolen cryptocurrency is often eventually converted into cash. So a holder with such a large ETH position could become a seller with little notice. If wallets connected to the hacker start transferring ETH to exchanges and Ethereum prices dip below $2,243, selling pressure could increase.
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Sam Daodu is a crypto analyst and the editor of 24/7 Wall St.'s Crypto Desk, where he covers Bitcoin, XRP, Ethereum, Solana and the altcoins investors search for most. His work focuses on price levels, spot ETF flows, on-chain data and the regulatory decisions that move crypto markets, written so a first-time buyer and a seasoned trader can both use it.
Sam has written about crypto professionally since 2019 and has published more than 2,000 articles. Before joining 24/7 Wall St., he wrote for crypto media outlets and Web3 companies and ghostwrote for crypto founders and token launches. His analysis is syndicated on Yahoo Finance, MSN and AOL and has been cited by other crypto news sites. He also founded MacLabs Marketing, a content and personal branding agency for crypto founders and executives.
When he isn't reading charts, Sam is usually at the gym or watching One Piece, a series he maintains has better tokenomics than most altcoins.
