As a researcher with experience in the DeFi space, I’m deeply concerned about the recent developments surrounding Curve Finance and its founder, Michael Egorov. The news that he is seeing his position liquidated due to the crumbling CRV prices and his large debt positions on multiple DeFi platforms is troubling.
Michael Egorov, the creator of Curve Finance’s stablecoin lending and borrowing platform, faces having his position terminated due to market forces.
As a financial analyst, I’d interpret that report by saying: According to the data from Lookonchain, my holdings included over 111 million CRV tokens used as collateral across four decentralized finance (DeFi) platforms, while my debts amounted to approximately $20 million.
As the price of CRV fell, other positions went underwater, causing a cascade of liquidations.
The #Curvefi founder(Michale Egorov) is being liquidated!
He currently has 111.87M $CRV($33.87M) in collateral and $20.6M in debt on 4 platforms.
— Lookonchain (@lookonchain) June 13, 2024
Curve Finance Woes
I’ve observed a significant downturn in CRV prices over the last week, with a steep decline of 45% since June 7. This price drop poses a challenge for users relying on CRV as collateral for Decentralized Finance (DeFi) loans, including the platform’s founder.
As a researcher studying the cryptocurrency market, I’ve noticed an increase in pressure on various platforms and their associated token prices after the unfortunate incident of a $20 million hack that took place on the UwU lending protocol just a few days ago.
In reaction to the occurrence, Egorov expressed satisfaction with the effectiveness of “gradual unwinds.” He commended the system’s exceptional functionality, explaining that this approach allowed liquidators ample time to gather resources and execute over-the-counter (OTC) transactions to eliminate the hacker’s position. Consequently, the system is now free of any funds belonging to the hacker, as well as any resulting bad debts, ensuring smooth operation.
Soft liquidations are part of Curve’s Lending-Liquidating Automate Market Maker Algorithm (LLAMMA).
According to blockchain intelligence firm Arkham, as of June 12, Egorov had obtained approximately $96 million in stablecoins, primarily from Curve’s crvUSD, as collateral against a total value of $141 million in CRV tokens spread across five different accounts on five distinct protocols.
$140M CRV nearing Liquidation
As a crypto investor, I’m following the latest move by Curve founder Michael Egorov. He’s currently borrowing a substantial amount of stablecoins, mainly crvUSD, worth approximately $95.7 million against his CRV holdings valued at around $141 million. This borrowing is being facilitated across five different accounts on five distinct protocols.
Based on current rates, Egorov is paying $60M annualized in order to keep his positions open on…
— Arkham (@ArkhamIntel) June 12, 2024
Previously, warnings had been raised by industry insiders and Defi specialists regarding the potential consequences of carrying such a substantial debt load.
“Trader ‘MisterSpread’ observed on X on June 13 that this development could have significant consequences across the entire Decentralized Finance (DeFi) market, unfortunately leading to potential declines.”
As an analyst, I’ve noticed a significant surge in CRV balances held on cryptocurrency exchanges. In just the past two hours, there has been a remarkable increase of 57%.
DeFi Fallout
CRV experienced a significant decline of 33% within minutes during late trading on June 12. At present, the DeFi token trades at a price of $0.283, having plummeted from its peak intraday value of $0.374. Regrettably, CRV now hovers at just 2% of its all-time high, which stood at a lofty $15.37 back in August 2020.
Other DeFi tokens such as GMX and Frax Share (FXS) are also seeing losses today but not as severe.
The markets remain stagnant today at a collective value of $2.58 trillion, as Bitcoin and Ethereum experience minimal price fluctuations after their recent declines.
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2024-06-13 14:58