#DeFi借贷市场 Seeing the flash crash of the BTC/USD1 trading pair, it reminded me of a common misconception many friends have encountered in the DeFi lending market.

The event itself is not complicated—when a low-liquidity trading pair encounters a large market order, the price is pushed down instantly, and arbitrage bots quickly restore the price. This situation is indeed more likely to happen on newly launched trading pairs, but what’s more important is the underlying issue it reflects.

I’ve observed that many people, when participating in DeFi lending, are attracted by high yields and overlook liquidity risk. For example, in this incident, borrowing USD1 to sell spot seems like a good strategy, but if the trading pair lacks sufficient liquidity, the execution cost could be much higher than expected. Plus, leverage amplifies the losses even further.

My advice is: before participating in any DeFi lending product, ask yourself three questions. First, is the average daily trading volume of this pair sufficient? Second, will my position size impact the market? Third, is there a backup plan to handle sudden liquidity changes?

In the long run, safety is always more valuable than returns. Earning steadily is the way to earn for the long term.