Weird stuff around LINK on Aave

It's a possible move, meaning it's valid and should be accounted for. Protect ya neck nigga

Some anons had a theory that there is not enough liquid link on the market to cover the borrowed links on aave, so the short squeeze will push the price over the zone where it is actually profitable to liquidate on aave. So I guess this transaction would be a bet on that possibility. However I am too much of a brainlet to try and figure out if this is actually possible. Any ideas?

Typically you borrow something to short it.

i.e you deposit USDC as collateral, borrow LINK, sell it on exchange. Thats shorting.

However these guys seem to have borrowed LINK and moved it to some other wallet where it currently sits which doesn't make much sense. Money laundering maybe.

I don't follow.

I was thinking this too. Some exploit of how Aave deals with liquidations. I don't know of the specifics of Aave enough right now, maybe I'll need to dig into that.

Maybe using 22 million usd would push the price that much and you don't get 15 million worth of link

Gotta be money laundering right?

Something like this is another possibility though I feel like $22m wouldn't have that much impact.

To me it seems like this is either:

-Money laundering
-Some kind of exploit of Aave or its liquidation process
-An OTC sale/short and they've just hidden the tracks well.

If it is to deal with liquidations, why borrow so much more link than is at risk of being margin called?

wonder what aave would make of it

It doesn't make sense to me that they would borrow LINK to cover their own ass in case of liquidation. I don't see what that would accomplish. It could be some kind of exploit of Aave and their liquidation process though I suppose.

docs.aave.com/risk/asset-risk/risk-parameters

The liq treshold, loan to collateral ratio and the bonus for liquidator depend on the type of collateral. If you wanted to pull off this type of heist, USDC has the best profile for it.

Yeah but why would you short link lmao

What makes you think they only used the first 350k to short?
What if they had another source of Link they used to short, for example from their own lending platform?
Wouldn't it be a bit too risky to risk losing all the Link you got from your customers, and risk destroying your own platform's reputation?
This may even work out better than expected and kill decentralized concurrents while making you look like you are better at managing funds than a automated process.

I dont see how this would kill Aave, unless they've spotted some exploit that I haven't.

Maybe they are indeed selling user deposits, but also borrowing on Aave as a sort of stop loss. That could make sense. It would be an expensive stop loss though as they'd pay the 10% liquidation fee.

Okay but play it out.. let's say they use this link to cover previous short positions getting liq'd... then what? Now they have this second short position and no link to cover it. They don't need this safety net if the short works out & price crashes, but if the price keeps going up, they are fucked whether it's their original short or this weird second short

USDC has loan to value ratio of 80%, liq treshold of 85% and liq bonus of 5%, so if I get this right, the liquidator would only be incentivized to liquidate if the price stays within 20% of the liquidation price. Any higher than that and its not worth it. The price of link could just shoot past that zone in case of that short squeeze. Not sure if I understand the Aave liq mechanic correctly though.

After reading all this, this makes the most sense and seems like the most logical explanation. I think $22m would cause a pretty big jump

I'm not sure. LINK's average daily volume is $1b. A lot of that is wash trades no doubt but still.

probably 80%+
as per every other top 10 coin

AAVE is built on blind trust of an automated system.
If it was enough to trust a system to make it work, Chainlink would not exist.

You have to keep in mind that these people are either degenerate gamblers or psychopaths.
They may have long gone past the point of no return, and are trying to reduce the damage when things happen.

They don't have a second short position.
They shorted 1.6m Link and are afraid of a short squeeze happening.
If they get liquidated they will lose the asset put as collateral on AAVE and Binance, but will keep their original Link amount and will be able to give it back to their customers even if the price increases too much.
Another possibility would be that they plan to use this 1.6m Link stack to close their short position on binance if the price goes up to protect the assets they have on it.

I don't know what happens when Binance liquidates your short worth a few millions and it costs more than your collateral.

Using link borrowed from AAVE to close a short on Binance would reduce the risk of causing extreme price movements when you have to buy back what you sold.
This way they could slowly buy back the shorted Link over weeks or month until they can give back the borrowed amount to AAVE.

sounds like we going to have some good APY on aave bois

Even still, $22m is just 10% of a days volume. They could buy it over 5 days and not have a huge impact. Certainly less than 35%.

They've shorted 350k on Aave.

They may have shorted more on other avenues like binance or quietly selling user deposits.

It could be essentially a stop loss as you say.