Curve finance is under pressure as CRV price plunges. As a result, its Founder, Michael Egorov, could be liquidated in the coming days.
No industry is risk-free. Be it trading or investing in traditional or decentralized finance (DeFi).
In DeFi, operations are trustless; here, code is law.
For example, you may choose to take a loan from Aave. There, you must place collateral and take a percentage of the collateral, often 40% to 70%, but it can be higher in some protocols.
If the collateral falls below the required threshold, the protocol automatically liquidates the collateral to repay lenders.
Every day, especially when crypto prices drop, thousands of traders are forced to forfeit their collateral in Aave, Maker, and other lending platforms.
Curve Finance Founder’s Liquidation Fear
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.https://t.co/WM1nW8JKwU pic.twitter.com/huwgetBXuS
— Lookonchain (@lookonchain) June 13, 2024
It is the fear of liquidation that Michael Egorov, the founder of Curve Finance, faces every day, especially regarding the performance of CRV, the native token of the stablecoin DEX.
As Arkham Intelligence data shows, Egorov is currently in a precarious financial position.
(Arkham)
Roughly $141 million worth of CRV are on the brink of liquidation.
Data shows that the founder has borrowed $95.7 million in stablecoins, primarily crvUSD, against $141 million in CRV across five different protocols.
The situation is so dire that Egorov has to pay $60 million in borrowing costs annually to maintain his positions on Llamalend alone.
In Llamalend, Egorov has to pay $50 million against an egregious 120% APY.
The reason? Borrowing crvUSD against CRV collateral is rare, so the interest rate is higher.
As of June 12, Egorov’s accounts constitute over 90% of the crvUSD borrowed on Llamalend.
The problem is that the founder’s runway is getting shorter by the day. All it takes is another bear push towards $0.20, and all his positions will be liquidated.
(CRVUSDT)
CRV is currently free-falling, dumping by over -25% yesterday to as low as $0.25.
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Will CRV Price Continue Crashing?
There have been liquidations before. When prices fell $0.40 in mid-April, 371 million CRV belonging to Egorov were nearly liquidated.
He narrowly avoided liquidation by infusing additional collateral and repaying parts of his loans.
The founder’s predicament can be traced back to the late July 2023 hack on Curve Finance, where users lost roughly $70 million.
Following the exploit, CRV prices flash crashed and have never been the same.
However, when the hack happened, Egorov was at risk of being liquidated since he had used millions of CRV to borrow $168 million across multiple protocols, including Aave.
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Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
