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A comment on Crypto Coin Tether Defies Logic on Kraken’s Market, Raising Red Flags. Parent comment

Re:Crypto Coin Tether Defies Logic on Kraken’s Market, Raisi... by rthomas6 on Friday June 29, 2018 @02:44PM (#17426647)
No, it's part of the protocol. When a collateralized position falls below the 150% (or whatever) mark, that position gets automatically liquidated and auctioned off to pay for the debt.

And the positions are set up to where you can borrow less than the maximum amount of DAI per ETH, to make your position more resistant to price drops.

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Re:Crypto Coin Tether Defies Logic on Kraken’s Market, Raisi... by JumpCrisscross on Friday June 29, 2018 @05:03PM (#17427859)
> When a collateralized position falls below the 150% (or whatever) mark, that position gets automatically liquidated and auctioned off to pay for the debt

The same thing happens with banks. It turns into a run when this forced liquidation drives prices down further which in turn fuels further redemption requests. It’s very possible to start the day 150% capitalised and end 20% because you sold 10% which tanked the market.

[ Parent | on HN ]