- The founder of Curve Finance, Michael Egorov, is experiencing the liquidation of his positions.
- He had collateralized over 111 million CRV tokens with a debt of $20 million spread across four different DeFi platforms, according to Lookonchain’s June 13 report.
- This situation escalated as the price of CRV continued to decline, leading to a series of forced liquidations.
Curve Finance founder Michael Egorov faces significant liquidations amid a dramatic decline in CRV token value and DeFi market turmoil.
Challenges Facing Curve Finance
CRV token prices have witnessed a steep decline over the past week, plummeting by 45% since June 7. These sharp drops have impacted those using CRV as collateral for DeFi loans, including the protocol’s own founder.
The situation was exacerbated by a $20 million hack on the UwU lending protocol earlier this week.
Egorov commented on the effectiveness of ‘soft liquidations’. “The system showed a fantastic performance,” he noted, adding “This allowed liquidators to prepare funds and conduct OTC liquidations of the hacker’s position. Consequently, the system has no remaining hacker’s funds or bad debts, and everything is operating smoothly.”
Soft liquidations are a function of Curve’s Lending-Liquidating Automated Market Maker Algorithm (LLAMMA).
Market Repercussions and Expert Insights
As of June 12, Egorov had been borrowing approximately $96 million in stablecoins, mainly Curve’s crvUSD, backed against $141 million in CRV across five accounts on five different protocols, according to data from blockchain intelligence firm Arkham.
Industry analysts had previously highlighted the significant risk posed by Egorov’s extensive debt position.
“This situation can ripple through the entire DeFi ecosystem, likely causing some pullbacks,” commented cryptocurrency trader ‘MisterSpread’ on X on June 13.
Crypto Quant founder Ki Young Ju observed a surge in the CRV balance on exchanges, which hit an all-time high, rising 57% in just two hours on June 13.
Fallout in the DeFi Sector
The price of CRV crashed by 33% almost instantaneously during late trading on June 12. The token is currently valued at $0.283, down from an intraday peak of $0.374. CRV has now plummeted 98% from its record high of $15.37 in August 2020.
Other DeFi tokens, such as GMX and Frax Share (FXS), are also experiencing declines, although not as severe as CRV’s.
The total cryptocurrency market is stable at $2.58 trillion, with minimal movement from Bitcoin and Ethereum after their dips earlier in the week.
Conclusion
The liquidation of Michael Egorov’s positions and the sharp decline in CRV prices highlight significant vulnerabilities within the DeFi sector. As these events ripple through the markets, stakeholders should be mindful of the potential for further disruptions and the need for robust risk management strategies. The continued observation of market trends and diligent analysis will be crucial for navigating the ongoing volatility in the cryptocurrency landscape.
