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Compound's three major markets may temporarily close: Elixir's liquidity crisis affects lending protocols.
[Block Rhythm] The risk control agency Gauntlet recently threw out an urgent proposal in the Compound community forum - requesting to temporarily freeze the withdrawal function of three key markets on Compound v3. The affected ones include the three lending pools of USDC, USDS, and USDT on the Ethereum network.
The culprit behind this warning is the Elixir protocol. The two tokens they issued, deUSD and sdeUSD, are now trapped in a serious liquidity crisis, and these two assets happen to be used as collateral by Compound. Gauntlet had actually submitted a risk parameter adjustment proposal a long time ago, but the governance committee has yet to approve it.
Before the new regulations take effect, Gauntlet's stance is very clear: first close the withdrawal channels and then talk. This means that these three markets are temporarily in a frozen state - neither new positions can be opened, nor liquidity can be withdrawn.
The fuse of this incident can be traced back to the massive loss revealed by Stream Finance the day before yesterday. Their fund directly evaporated 93 million USD, with Elixir contributing a hole of 68 million USD. Now, this bomb has finally exploded into the broader DeFi ecosystem.