Key takeaways
- XRP-backed loans face $8.84 million liquidation exposure
- Another 10% decline could affect 1,070 positions
- Borrowers can reduce risk by adding collateral
Approximately $8.84 million in XRP-backed loans could become eligible for liquidation if collateral prices decline another 10%, exposing more than 1,000 leveraged positions following XRP's recent market selloff.
A November 6 analysis of Morpho's onchain lending data identified 1,070 positions on Coinbase's Base network approaching liquidation thresholds. The calculations used loan balances and collateral values recorded around 13:24 UTC.
XRP-Backed Loans Face $8.84 Million in Potential Liquidations
The affected Morpho market allows borrowers to obtain USDC stablecoins using cbXRP as collateral.
At the November 6 snapshot, the market held approximately 59.2 million USDC in outstanding debt backed by 119.9 million cbXRP.
A further 10% decline in the collateral oracle price would make $8.84 million in debt eligible for liquidation, representing nearly 15% of total borrowing.
Even a smaller 5% decline could expose 462 positions carrying approximately $3.23 million in debt.
These scenarios overlap: the 462 positions are included within the larger group of 1,070 and should not be counted twice.
The findings follow XRP's recent 10% price crash to an 11-week low, which pushed the cryptocurrency toward $1.18.
Coinbase previously expanded its crypto-backed lending services to include XRP, allowing eligible customers to borrow stablecoins without immediately selling their holdings.
Why Falling XRP Prices Can Trigger Liquidations
Morpho's cbXRP lending market uses a liquidation loan-to-value threshold of 62.5%.
Borrowers become eligible for liquidation when their outstanding debt exceeds that proportion of the collateral's value.
For example, a loan starting at 60% loan-to-value would rise to approximately 66.7% following a 10% collateral-price decline, assuming the debt and collateral quantities remain unchanged.
Borrowers can reduce exposure by repaying loans or depositing additional collateral.
This mechanism differs from the proposed XRPL native lending system, which remains subject to validator approval.
The broader market for XRP-backed credit is also expanding.
Coinpaper previously reported that 225 million XRP backed $152 million in Maple loans, although those arrangements operate under different lending terms.
Could XRP Liquidations Increase Selling Pressure?
When Morpho positions become eligible for liquidation, external liquidators can repay debt in exchange for collateral and a liquidation incentive.
However, receiving cbXRP does not automatically mean native XRP has been sold on an exchange.
The positions within the 10% stress scenario reportedly held approximately 12.73 million cbXRP in collateral. Any subsequent sales would require separate transaction evidence.
Other XRP-linked lending products have introduced similar borrowing opportunities, including Flare's RLUSD lending integration.
Ripple has also explored using XRP collateral for institutional credit, demonstrating how lending could expand XRP's financial utility while introducing additional risks.
