Ethereum’s (ETH) ongoing struggles are creating significant risks for DeFi investors, especially those who have borrowed against their ETH holdings on platforms like MakerDAO. Two major Ethereum whales are now facing liquidation risks of up to $238 million if ETH’s price continues to decline, underscoring the vulnerability of decentralized finance (DeFi) in the face of market fluctuations.

Ethereum Whales and MakerDAO Liquidation Risks

The two Ethereum whales in question have borrowed large sums of DAI from MakerDAO, a decentralized lending platform, and used their ETH as collateral. Combined, they hold a total of 125,603 ETH, which is worth approximately $238 million at current prices. As Ethereum’s value struggles to maintain its position, these whales are at increasing risk of liquidation.

One whale, who borrowed over $75 million worth of DAI, has pledged 60,810 ETH (worth $110 million) as collateral. Their liquidation threshold is set at $1,793, meaning that if ETH drops below this level, they face a forced liquidation of their assets to cover the borrowed amount. Concerns are rising because this whale has been inactive for three weeks, making it unlikely that they will be able to manage the risk or reduce their debt before a potential liquidation.

The second whale has borrowed over $68 million in DAI and used 64,792.7 ETH (worth $122 million) as collateral. Their liquidation price is slightly lower at $1,787. Although this whale was able to avoid liquidation in mid-March by repaying part of their debt, the persistent drop in Ethereum’s price has pushed them into danger once again. This growing uncertainty about Ethereum’s future performance is fueling speculation about potential liquidation events.

The Impact of ETH’s Decline on the DeFi Sector

The struggles of these Ethereum whales are symptomatic of broader challenges facing the DeFi sector. Ethereum is the backbone of decentralized finance, and its continued decline in price is having a direct effect on the entire ecosystem. Since its peak in December 2024, Ethereum has experienced significant losses, falling below the critical $2,000 level and now down approximately 45% year-to-date.

The effects of this price drop are not limited to individual investors but extend to the entire DeFi market. According to data from Defillama, the total value locked (TVL) in DeFi protocols has fallen drastically. Ethereum’s DeFi TVL has plummeted from over $66 billion at the start of 2025 to just $50 billion today. Of the top ten DeFi protocols on Ethereum, most have seen their TVL decrease significantly, with declines ranging from 5% to 37% in the past month. Only Aave and Sky (formerly MakerDAO) have seen increases during this period.

This decline is also attributed to broader economic factors, including rising US inflation and geopolitical tensions. Ethereum’s struggles have been exacerbated by these conditions, along with increasing competition from other Layer-1 and Layer-2 solutions, which are siphoning value away from Ethereum. Analysts point out that Ethereum’s value proposition as an investment is under threat as the network faces declining transaction activity, fee generation, and user growth.

Future Outlook for Ethereum and DeFi

Despite the recent setbacks, Ethereum still plays a crucial role in the DeFi space. However, experts are divided about its future. Some believe that Ethereum’s core functionality as a decentralized network will continue to be valuable, while others argue that the ecosystem has grown too complex and is losing its edge to other blockchain solutions. As Layer-2 solutions and alternative tokens grow, Ethereum’s mainnet has faced increasing difficulty in maintaining its position as the leader in the crypto space.

The liquidation risks faced by Ethereum whales on MakerDAO are a stark reminder of the volatility inherent in DeFi. As the price of ETH fluctuates, investors and users must be vigilant and prepared for sudden changes in the market that could lead to substantial losses. Whether Ethereum can recover or continue to struggle depends largely on its ability to regain investor confidence and overcome the challenges it faces in an increasingly competitive market.