- According to onchain data, the founder of Curve Finance is selling CRV at a rate of $0.4 on the OTC market.
- This is how he seeks to repay a $12 million FRAX loan taken out against the CRV.
- Egorov has several other loans, the largest of which is listed on Aave.
- Experts believe their forced liquidation would set off a chain reaction across the DeFi sector.
Curve Finance founder Mikhail Egorov is selling CRV tokens on the OTC market at $0.4, according to analysts at Lookonchain. Over the past 24 hours, the token’s exchange rate “fell” by more than 7%. At the time of writing, it is trading at $0.59, according to CoinMarketCap:
CRV/USD chartWhat’s happening with CRV and why is Egorov “dumping” the asset?
According to DeBank data, the Curve Finance founder is exchanging CRV for USDT, which he then spends to repay a loan on FRAXlend.
Significantly, according to Lookonchain data, 5 million CRVs were sold to Tron founder Justin Sun at the same price of $0.4 in the OTC market.
The borrowing mechanism of the FRAXlend platform involves a gradual increase in fees when liquidation risk exceeds 85%. According to analysts at Delphi Digital, the current penalty is about 82%, but it will reach 10,000% in a few days.
On FRAXlend Egorov borrowed $12 million FRAX secured by $46.6 million in CRVs. That loan is at risk of forced liquidation at $0.43 with a 99.9% probability of liquidation.
To avoid this, Curve Finance’s founder created the crvUSD/fFRAX pool. The second asset is a token directly from FRAXlend. Egorov also added a financial incentive for pool participants in the form of 100,000 CRVs. This will allow him to reduce the risk of liquidating the loan, as well as delay the process, Delphi Digital experts said.
At the time of this writing, Egorov has paid off about 8 million FRAX. At the same time, he continues to actively sell CRVs.
The rest of the Curve Finance founder’s loans and why it matters
In total, Egorov has pledged about 440 million CRV (47% of the offering) to the following platforms:
- 305 million CRV in AAVE – 70 million USDT/USDC;
- 63.5 million CRV in Abracadabra – 18.7 million MIM;
- 46.6 million CRV in Fraxlend – 12 million FRAX;
- 25 million in Inverse – 7.7 million Dola.
Besides the FRAXlend loan, the Aave loan is in danger of liquidation, as DeBank shows:
In this case, the rate at forced closing would already be $0.37. The Health Rate for this loan is 1.57. If it reaches 1, the loan will be closed.
This could set off a chain reaction in the DeFi sector, CoinDesk believes. Forcing the liquidation of such a volume of CRV at a below-market rate would not only affect the asset’s exchange rate, but also the financial stability of some other protocols, the publication added.
Curve Finance hack
We previously reported that the platform was attacked due to a vulnerability in the smart contract of the Viper programming language. The damage from the hacker’s actions amounted, according to various estimates, to about $50 million. Against this backdrop, the CRV exchange rate “sagged” from $0.64 to $0.54 in less than a day, according to CoinMarketCap.
Criticism Egorov
It was prompted by a lawsuit from venture capital funds against the Curve Finance founder, as well as his purchase of a $41 million mansion in Melbourne. At the same time, it remains one of the largest CRV holdings, and possible adverse consequences for it could have a significant impact on the asset’s exchange rate. Therefore, Gauntlet experts recommended that the Aave community freeze the CRV pool. This decision was motivated by the fear that the loan would become uncollectible.
The decision was prompted by the fear that the loan would become uncollectible.