Blog / Historical Archive

Black Thursday (March 12, 2020): The Crash That Stress-Tested DeFi

A 50 percent ETH crash, gas spikes and zero-bid Maker vault auctions.

The crash

On March 12, 2020, ETH fell from about $194 to under $100 within roughly 24 hours, and BTC dropped near 50 percent intraday on March 12–13. BitMEX liquidations cascaded until the exchange went offline briefly, citing hardware issues.

Gas spikes and broken auctions

Ethereum gas prices rose above 200 gwei. Maker's liquidation auctions required keepers to bid, but many keepers' transactions failed or were priced out. Some bidders won collateral with bids of 0 Dai, and roughly $8.3 million of ETH was liquidated for nothing.

The debt hole

The zero bids left Maker with about 5.4 million Dai of bad debt. Maker held a debt auction on March 19, 2020, minting and selling MKR to recapitalize the system, the first real use of MKR as a backstop.

Changes afterward

Maker added USDC as collateral to help Dai regain its peg, lengthened auction durations, and later introduced Liquidations 2.0 with Dutch auctions in 2021. Other lenders such as Compound and Aave adjusted oracle and liquidation incentive settings.

Health factor math

On Aave, health factor equals collateral times liquidation threshold divided by debt. With $10,000 of ETH at an 82.5 percent threshold and $6,000 of debt, HF is 1.375. A 27 percent ETH drop pushes HF to 1.0 and allows liquidation, which is roughly what many borrowers faced that day.

By the numbers

For Black Thursday, the reference figures are date of March 12-13, 2020, eth drawdown of ~50% in 24 hours, zero-bid collateral lost of ~$8.3 million, mkr debt auction of ~$5.4 million DAI shortfall. The comparison table below lines up metric, march 12–13, 2020 — ETH low: ~$90; Zero-bid liquidations: ~$8.3M of ETH; Maker bad debt: ~5.4M Dai; MKR debt auction: Mar 19, 2020.

Modeling Black Thursday with the Lending Health Factor Liquidation Calculator

The Lending Health Factor Liquidation Calculator takes three inputs — Collateral ($), Liq. threshold (%), Debt ($). Health factor = collateral × LT ÷ debt. With its default inputs (Collateral ($) = 10000; Liq. threshold (%) = 82; Debt ($) = 5000) it returns 1.64 HF; swap in the figures from Black Thursday above to reproduce the scenario yourself.

Modeling Black Thursday with the Leverage Liquidation Price Calculator

The Leverage Liquidation Price Calculator takes three inputs — Entry ($), Leverage (x), Maintenance margin (%). Long liq ≈ entry × (1 − 1/lev + MMR). With its default inputs (Entry ($) = 60000; Leverage (x) = 10; Maintenance margin (%) = 0.5) it returns 54,300 $; swap in the figures from Black Thursday above to reproduce the scenario yourself.

Data Table

For educational and informational purposes only. Not financial, investment, tax or legal advice. Figures are approximate and historical; crypto assets are volatile and you may lose capital. Do your own research.