Sky DeFi Investor Loses $106 Million Amid Trump Tariffs Market Crash

A massive liquidation event on the Sky DeFi platform has left an investor facing a staggering $106 million loss. The incident occurred as the market experienced a significant crash, triggered by U.S. President Donald Trump's announcement of sweeping tariffs. The tariffs, which included a 25% duty on vehicle imports and a 10% baseline tariff on all imported goods, sent global markets into a tailspin, with the S&P 500 suffering its worst two-day loss in history, wiping out $5 trillion in value. The crypto market was not spared from the turmoil, with Bitcoin dipping below $75,000 and major altcoins like Solana, Ripple, and Dogecoin falling by over 20% in a matter of hours.

The liquidation on Sky involved an investor who had locked up 67,570 ETH as collateral to borrow the decentralized stablecoin DAI. The protocol enforces an over-collateralization policy, requiring users to deposit significantly more ETH than the value of the DAI borrowed. When the market value of ETH plummeted, the collateral ratio of the investor's vault fell below the critical liquidation threshold, triggering an automatic liquidation. The investor's position was wiped out as ETH tumbled over 14% on April 6, causing the collateral ratio to drop to 144%, just under the platform’s required 150%. This allowed the Sky protocol to seize and auction off the ETH collateral, resulting in a loss of approximately $106 million.

The situation quickly escalated beyond a single investor. Another large holder, with 56,995 wrapped ETH used as collateral, narrowly avoided liquidation by making emergency capital injections. Meanwhile, an anonymous whale, on the brink of losing 220,000 ETH, took drastic action by depositing an additional 10,000 ETH and 3.54 million DAI to stave off liquidation. These deposits raised the position’s liquidation threshold and temporarily bought time against further ETH price declines. However, the scale of market-wide damage was unprecedented, with over 446,000 positions liquidated in a single 24-hour window, and total losses surpassing $1.36 billion.

The market crash was not an isolated event but was part of a broader macroeconomic fear sparked by Trump's tariff policies. The announcement sent global markets spiraling, with traditional markets also feeling the impact. The Hang Seng Index dropped over 12%, while Japan’s Nikkei 225 fell nearly 7%. U.S. stock futures plunged across the board, pointing to a chaotic start to the week. Amid the panic, safe havens like gold and the Japanese yen saw renewed demand, further draining liquidity from the crypto market. Billionaire hedge fund manager Bill Ackman voiced concerns, urging Trump to suspend the tariffs for 90 days, warning of an “economic nuclear winter” and claiming the business community was rapidly losing confidence in the administration’s leadership.

Despite the chaos, some believe this could signal the market’s bottom. Nansen Research estimates a 70% chance that the market could bottom out by June, depending on how tariff negotiations unfold. However, the fallout from the market crash continues. Ethereum now trades around $1,515, and Tether (USDT) is within striking distance of overtaking ETH by market cap. If the bloodbath continues, ETH could lose its position as the second-largest cryptocurrency entirely. With over $1.36 billion liquidated in one day, the market’s message is clear: risk appetite is fading fast, and unless prices rebound, more whales could soon meet the same fate as the $106 million Sky liquidation victim.