Curve (CRV), a popular decentralized finance (DeFi) protocol known for facilitating low-fee stablecoin swaps, is facing a double whammy as its native token, CRV, faces a 28% price drop in the last 24 hours and liquidations of millions in CRV collateral.
According to Coinmarketcap data, the token’s value fell to $0.256, marking a sharp 28% decline over the past 24 hours, with a notable crash in the last few hours.
The sudden price plunge is attributed to growing panic among CRV holders, triggered by a report from crypto intelligence platform Arkham. The report revealed that Curve founder Michael Egorov borrowed a significant sum – $95.7 million in stablecoins (mostly crvUSD) – using $141 million worth of CRV as collateral across five different protocols.
Michael is encountering additional liquidation risk with his on-chain loans following an earlier partial liquidation of his positions on Thursday. Egorov “currently has 111.87 million CRV ($33.87 million) in collateral and $20.6 million in debt on four platforms,” said Lookonchain.
Michael had borrowed various stablecoins from DeFi platforms such as Inverse, UwU Lend, Fraxlend, and Curve’s LlamaLend, using CRV tokens as collateral. Arkham had predicted that Egorov’s $140 million in CRV positions were approaching liquidation and noted that he is incurring $60 million annually to sustain his positions on LlamaLend.
Earlier today, Egorov began facing liquidations on Inverse but took measures to mitigate the risk. His position on Inverse had a health rate of 1.07, with liquidation typically triggered at a rate of one. According to on-chain data, Egorov started repaying the borrowed DOLA stablecoin to improve his position. However, his loan on UwU Lend remains in jeopardy.
This rapid liquidation suggests potential financial strain or risk management issues for Egorov. It also highlights the inherent volatility and risks associated with leveraging crypto assets for borrowing.
As of now, there’s been no public response from either the Curve Protocol founder or the Curve Finance team regarding the CRV price crash. Notably, Egorov did address liquidation risks in response to a user query on a different platform, but this was nearly 10 hours prior to the current price drop.
The lack of official communication from Curve leadership is further unsettling investors. The situation underscores the critical need for transparency and responsible risk management in the DeFi space, particularly when founders engage in leveraged positions that can significantly impact the project’s stability.
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