Curve DAO (CRV) Faces Major Liquidation Risk Following Sharp Price Drop

• The value of the altcoin Curve DAO (CRV) plummeted by up to 35% within hours.
• This sharp decline followed reports that Curve’s founder, Michael Egorov, faces potential liquidation.
• On-chain analysis platform Arkham has highlighted Egorov’s precarious trading situation.

Discover the unraveling of a major DeFi event as Curve DAO founder faces liquidation risks, causing a significant market tremor.

Curve DAO Plunges: Egorov’s Liquidation Looms

In a dramatic turn of events, Curve DAO (CRV) saw its price plummet by over 35%. This drop was triggered by the circulating reports that Michael Egorov, the protocol’s founder, may be on the brink of liquidation. Egorov’s predicament stems from his vast borrowing against large CRV holdings. According to Arkham, he has 140 million dollars in CRV that is on the verge of being liquidated due to substantial debt in stablecoins.

The Liquidation Threat and Its Ripple Effects

Over the past 24 hours, Curve DAO’s price has dropped by more than 30%, sending shockwaves through the crypto markets. The root cause is Egorov’s exposure to liquidation risks on multiple DeFi platforms. Specifically, he has borrowed approximately 95.7 million dollars in stablecoins, primarily crvUSD, against 141 million dollars in CRV, spread across five different accounts. Analysts predict that should the price of CRV continue its downward trajectory, these liquidations are inevitable.

$140M CRV nearing Liquidation

Curve founder Michael Egorov is currently borrowing $95.7M in stablecoins (mostly crvUSD) against $141M in CRV, across 5 accounts on 5 protocols.

Based on current rates, Egorov is paying $60M annualized in order to keep his positions open on… pic.twitter.com/ipTlWLZOAx

— Arkham (@ArkhamIntel) June 12, 2024

Egorov reportedly holds a 50 million dollar debt on the Llamalend platform, with an annual interest obligation amounting to 60 million dollars. This unusually high-interest rate is primarily due to the rarity of borrowing against CRV on Llamalend. Egorov’s debts extend to other DeFi platforms including UwULend. Initial reports also indicated that some of his positions on Inverse had been liquidated. In a bid to mitigate the liquidation risk, Egorov has started repaying his stablecoin debt in DOLA, thereby improving his health score.

Impact on Major Market Players

The declining price of CRV has had significant repercussions on major market players. For instance, a crypto whale known by the address 0xF07 transferred approximately 29.62 million CRV, valued at around 7.68 million dollars, to Binance due to liquidation pressures on Fraxlend. Additionally, Ki Young Ju, founder of CryptoQuant, observed a significant increase in CRV balances on exchanges, peaking at an all-time high within a span of just four hours.

CRV Price Reactions and Future Projections

Initially, CRV’s price dipped from 0.35 dollars to 0.21 dollars before partially recovering to 0.26 dollars. This partial recovery indicates sustained investor interest despite liquidation concerns. Major crypto holders have been affected by this downturn. For example, the 0xF07 whale was compelled to transfer a massive 29.62 million CRV to Binance due to Fraxlend liquidation.

Egorov’s liquidation risk is a significant event in the DeFi sector, underscoring the risks associated with borrowing and collateral usage within these protocols. The price volatility of CRV also exemplifies the unpredictable and highly volatile nature of crypto markets.

Conclusion

In summary, the potential liquidation of Michael Egorov’s CRV holdings has created significant volatility within the DeFi and broader cryptocurrency markets. While the future remains uncertain, this event underscores the inherent risks of decentralized finance and the rapid market reactions to key developments.