DeFi Saver Automation Saves $446 Million in Liquidations
At the end of January 2026, the price of Bitcoin and Ethereum plummeted by 26% and 33% respectively in just six days. This sudden downturn triggered a wave of liquidations across DeFi platforms, with Aave processing a staggering $429 million in liquidations across approximately 12.5K transactions, its highest since May 2021. For leveraged positions in lending protocols, third-party liquidations are the most expensive way for a position to unwind, with three main factors contributing to this outcome.
The first factor is position size, as Aave V3's default setting allows a liquidator to repay a borrower's entire debt in a single transaction. A 50% cap applies only if the position's health factor is above 0.95, the collateral and debt reserves are both above $2,000, and the asset accounts for less than half of the position's total debt. If any of these conditions are not met, the entire balance can be cleared in a single call.
The second factor is the penalty, with ETH collateral on Aave V3 carrying a liquidation bonus of around 5%. This bonus is seized from the borrower and goes mostly to the liquidator, with a portion also routed to the Aave treasury. Aave's efficiency mode compresses this bonus to 1% for tightly correlated pairs, while more volatile collateral is subject to higher rates.
The third factor is liquidity, as positions are often sold into thin, unfavorable liquidity conditions. This can lead to a situation where a position has to be liquidated in fragments, as seen on February 5th when a USDC loan backed by 355,093 AAVE worth around $28.4 million was liquidated in fragments of $500K to $1.5 million before Wintermute cleared the remainder in a single $10.1 million liquidation.
DeFi Saver's automation tools aim to mitigate these issues by providing a safety net for borrowers. Their Liquidation Protection tool is triggered when a position's safety ratio breaks 105%, repaying enough debt to lift the safety ratio 5% clear to 110%. This means that the position never reaches the liquidation point, avoiding the close factor and the 5% penalty.
DeFi Saver's Automated Leverage Management tool works in a similar way, running the same repay logic against a trigger and target ratio set by the user. It also works in the other direction, re-leveraging as the ratio recovers. Additionally, the Loan Shifter tool moves a position between Aave and Fluid's main ETH/USDC vault in a single flash-loaned transaction, offering more room on the position without repaying a cent.
In a case study, DeFi Saver's automation tools fired 382 repay actions across Aave V3 on Ethereum, Arbitrum, Base, and Optimism between January 25 and February 9. These actions defended over $446 million of at-risk collateral supporting $335 million of debt, with no protected position liquidated, and estimated avoided penalties at around $8.38 million.