Curve Finance Faces Major Crisis: CRV Token Plummets 30%

June 14, 2024 · Crypto News, TGbot · Source:NewCoinSpot

Curve Finance, a leading DeFi protocol, experienced a significant collapse on Thursday as its native token, CRV, saw a sharp 30% decline. This sudden drop was triggered by the automatic liquidation of loans tied to the protocol’s founder, Michael Egorov.

Blockchain analysis firms Lookonchain and Arkham reported that Egorov’s addresses had borrowed nearly $100 million in stablecoins, primarily crvUSD, using $140 million worth of CRV as collateral.

The abrupt price fluctuation led to a massive sell-off, causing the CRV token to drop significantly. Egorov later confirmed on X (formerly Twitter) that his positions had been liquidated, stating, “I have repaid 93% and plan to repay the remaining amount soon. This will help users avoid such situations.”

According to Debank, Egorov had used CRV as collateral for loans on platforms such as Inverse, UwU Lend, Fraxlend, and Curve’s LlamaLend. Over the past 24 hours, his wallet’s total holdings decreased by 50%.

Egorov has been actively reducing risk, as evidenced by wallet transactions showing repayments to Inverse and LlamaLend using FRAX, DOLA, and CRV tokens. Additionally, some addresses have swapped CRV for Tether’s USDT.

The liquidation of such substantial positions has started to exert pressure on other DeFi protocols. CRV is widely used across the ecosystem as a trading pair and in liquidity pools, amplifying the impact of its price drop.

The fallout has been significant, with one address on Frax Lend, another lending protocol, facing a liquidation of $3.3 million due to the declining CRV price.

This is not the first time Egorov’s borrowing activities have caused turbulence in the cryptocurrency market. In 2023, exploitations of several Curve lending pools led to a sudden crash in CRV prices, putting over $100 million at risk of liquidation. At that time, prominent DeFi figures like Tron founder Justin Sun intervened to provide liquidity, purchasing millions of CRV at a discount to prevent broader damage to the crypto ecosystem.