Late May saw nearly $959 million in leveraged crypto positions liquidated in a single day, with about $897 million of them longs, as Ether briefly slipped below $2,000. The selloff came alongside a record 16.39 million ETH in futures open interest — roughly $32.6 billion notional — making the unwind especially violent. It wasn't an isolated event: a week earlier, markets had already absorbed another $563 million in forced liquidations, about $244 million of which were Ether longs.
The 24-hour wipeout
The bulk of the damage hit long traders who had piled on leverage as ETH rallied earlier in the month. When the price cracked below $2,000, cascading margin calls and automated liquidations accelerated the drop. Data from the period shows that the vast majority of the $959 million in liquidations came from long positions — a classic long-squeeze pattern amplified by record open interest. The earlier $563 million event a week before had a similar profile, though with a smaller share of Ether-specific longs.
Aave steps in after court seizure scare
Earlier in May, Aave had warned that a proposed U.S. court seizure of roughly 30,765 ETH tied to exploit recoveries could trigger cascading liquidations across its lending markets. The concern was that a forced sale of that collateral might push ETH lower, setting off a chain reaction of underwater loans. In response, Aave has since reinstated pre-event WETH loan-to-value ratios — around 80%+ on several networks — across its V3 deployments as part of what it described as post-incident remediation. The restoration suggests the immediate risk from that specific seizure has passed, but it also shows how quickly a court order can rattle DeFi lending protocols.
Why leveraged lending amplifies swings
DeFi lending is built on overcollateralisation: borrowers put up more than they take out. But during sharp drops, oracle price updates, sudden jumps in borrow APRs, and races between liquidation bots can create concentrated on-chain sell pressure. The record open interest meant a lot of leveraged positions were vulnerable to even a modest dip. When ETH fell below $2,000, the mechanics kicked in hard. The earlier Aave warning about the court-ordered ETH seizure highlighted the same fragility — a single large liquidation event can set off a domino effect if markets are already stretched.
The specific 'rsETH incident' that prompted Aave's LTV restoration remains unclear from public filings, but the broader pattern is familiar: when leverage builds up to record levels, the unwind can be sudden and costly. With open interest still elevated and ETH trading back above $2,000, traders are watching for the next trigger — whether it's a court order, a whale move, or just a normal pullback that turns into something bigger.
