The Ethereum Foundation is now facing a major financial risk after locking a huge amount of ETH into a MakerDAO vault. This decision has put the foundation in debt by about 78 million DAI, a stablecoin tied to the U.S. dollar.
But the real danger lies ahead—if Ethereum’s price crashes to $1,100, the foundation’s collateral could be liquidated, triggering on-chain liquidations worth over $900 million.
Ethereum Liquidation Threat Looms
MakerDAO allows users to borrow DAI by using ETH as collateral. The Ethereum Foundation took this route, but now the crypto market’s instability has raised concerns. If ETH’s price falls too much from its current price of $1889, the collateral could be automatically liquidated, leading to a loss of 900 million.
This situation puts not just the Foundation at risk but also impacts the global crypto market, as such a large liquidation could cause further price drops.
Market analysts have started speculating about the reasons behind this move. Some believe the Foundation might have expected ETH prices to remain stable or rise.
Others suggest that the borrowed DAI could have been used for funding projects, operations, or strategic investments. However, the risk of liquidation now puts the Foundation in a tough spot.
Declining Ethereum Foundation’s Treasury
The Ethereum Foundation holds a large amount of ETH in its treasury, making up around 81.3% of its total assets. While this shows confidence in Ethereum’s future, it also creates a risk during price drops.
Reports show that the foundation’s treasury was worth about $970.2 million as of October 2024, falling from $1.6 billion in March 2022. This decline is due to both spending and ETH’s price drop over the past two years.
Selling ETH to Cover Expenses
To manage its treasury, the Ethereum Foundation has been selling ETH from time to time. In December 2024, it sold 100 ETH for stablecoins, adding to a total of 4,266 ETH sold that year.
This brought in about $12.21 million, with an average selling price of $2,796 per ETH. These sales help cover expenses, but if ETH’s price keeps falling, the foundation may need to sell more at lower prices.
As of now, Ethereum’s price is trading around $1889, reflecting a drop of 8.6% with its market cap plunging to $228 billion.
