The Curve Finance protocol is facing serious concerns and potential difficulties in the near future, according to an analyst at hedge fund Alphabeth Capital. The expert describes the protocol as a “ticking bomb” and highlights the involvement of co-founder Mikhail Egorov and liquidity provider Michael Patrin as the main issues. The analyst predicts that the protocol ecosystem will undergo a global “stress test” in February 2024.
A user on the social network formerly known as Twitter, named Defi_Made_Here, has also raised alarms about the project, pointing out factors that could lead to a crisis. The expert claims that the protocol still holds a systemic risk that was not resolved after a hack in the summer of 2023.
The analyst notes that co-founder Mikhail Egorov has been struggling to repay his loans for a significant period of time. Despite recent news of partial loan repayments, Egorov still carries a substantial debt, increasing by $1.7 million each month, according to the expert.
In addition, Egorov has taken out additional loans of $75 million in the fall of 2023, using the Curve stablecoin, crvUSD, as collateral. The liquidity provider, Michael Patrin (also known as 0xSifu), is identified as the largest liquidity provider and is allegedly shorting the protocol’s native token, CRV, which puts further pressure on Curve Finance and lenders.
The analyst suggests that Patrin may withdraw liquidity from the pool once the protocol’s OTC tokens become tradable in February 2024. This action is seen as a “true stress test” for the protocol, according to the analyst.
While this development is perceived as unnecessary, it poses significant risks for the entire protocol, according to Defi_Made_Here. Currently, Curve Finance ranks 18th among the largest DeFi projects, with approximately $1.6 billion in blocked assets, as reported by DeFiLlama.
It is worth mentioning that earlier reports indicated that the founder of Curve Finance had successfully paid off all debts on Aave.