According to Bitpush, recently, Curve founder Michael Egorov’s leveraged position has been liquidated by about 100 million CRV tokens. So, what has the DeFi leader Curve experienced recently? Besides the “old wounds” that have not healed, what is the real dilemma faced by Curve and other DeFi leaders? Michael Egorov, the founder of Curve, seems to have once again turned the crisis into an opportunity, but has the crisis really passed?
The CRV triggered a liquidation crisis, and Michael Egorov may pass the danger
On June 8th, with Bitcoin falling, CRV began to plummet; after two days of Bitcoin fluctuations, on June 11th, Bitcoin once again dropped significantly, forming a bearish engulfing pattern on the daily chart for CRV, with strong bearish pressure. Influenced by the macro market, on June 12th, as Bitcoin and others started to rebound, most mainstream coins rose, but CRV was unable to rebound and continued to be suppressed by the bears. On June 13th, Bitcoin fell again, mainstream coins plunged, and CRV experienced a major collapse, triggering the liquidation of a large amount of CRV tokens held by Michael Egorov.
On June 13th, data showed that Curve founder Michael Egorov’s leveraged position had been liquidated by about 100 million CRV tokens, worth about $27 million. The remaining position is 39.35 million CRV in the main address, with a loan of $5.4 million, and the health ratio is currently above 1 so it will not be liquidated temporarily. Subsequently, according to Bitpush, on June 13th, NextGen Venture co-founder Christian announced on X platform that he had obtained 30 million CRV tokens from the Curve founder.
With the support of NextGen Venture co-founder Christian, Michael Egorov may pass the danger. On June 13th, Curve founder Michael Egorov posted on X platform: “Curve Finance team and I have been working hard to solve the liquidation risk issue today. Many people know that all my loans have been liquidated. My position was too large, the market could not bear it, resulting in $10 million in bad debt. Only the CRV pool on the Curve lending platform (lend.curve.fi) was affected. I have repaid 93% and plan to repay the remaining bad debt soon, which will help users avoid losses in this situation.”
Was Michael Egorov damaged in this liquidation? Ethereum core developer eric.eth posted on X platform that the Curve founder did not suffer “losses” from the CRV liquidation, as he made $100 million in profit from a $140 million CRV position, and selling on the market at the same price (drop) would cause dissatisfaction in the community. Although eric.eth’s statement seems reasonable at first glance, it is not entirely accurate. Michael Egorov’s liquidation was essentially passive, mainly due to sudden market changes in the crypto market. If Michael Egorov wanted to sell tokens, he could have easily coordinated with institutions to sell the tokens in a liquidation manner, even if the profit change was not significant, but such a large liquidation would have a significant impact on the Curve ecosystem.
Why did CRV fall all the way down? Checking the crisis of Curve
As a DEX platform mainly focused on stablecoins, Curve’s unique advantage is that crvUSD can be paired with various collateral assets, creating a rich ecosystem for exchanging assets. CRV’s large-scale swap business has always dominated the industry, and the team has been updating the project and introducing new features, gaining market trust. When Curve was first launched, the CRV token reached a high of $63, during the last bull market, the CRV token remained around $6 for a long time, and during the bear market, the CRV token value was around $1. However, in this current bull market, instead of starting a bull run, CRV has been falling all the way, with the most important turning point being July 2023.
In late July 2023, due to a re-entry vulnerability caused by the Vyper programming language, four Curve Finance pools were attacked by hackers, resulting in a total loss of about $70 million. This directly led to the founder of Curve facing a huge liquidation risk. However, as this was a malicious hacker attack, various forces in the crypto market have expressed their support for Curve. In addition to Egorov selling over 106 million CRV tokens to 19 institutions and investors for funding, crypto celebrities such as Sun Yuchen, Du Jun, and Maji Big Brother also bought CRV. Sun Yuchen bought 5 million CRV tokens, Du Jun bought 10 million CRV tokens for $4 million, and Maji Big Brother bought 3.75 million CRV tokens for $1.5 million, all of which were pledged and locked for six months.
On February 1st, Michael Egorov started unlocking the CRV tokens he sold at a 30% discount below the market price. On February 2nd, Huang Licheng transferred 3.75 million CRV tokens (about $1.75 million) he purchased to Binance, expected to achieve a profit of +16%; on the same day, an OpenSea user with the address starting with “0xb0b” transferred 2.5 million CRV tokens (worth $1.14 million) bought from Curve founder Michael Egorov over the counter to Binance; subsequently, Cream Finance, among others, also sold off tokens. On February 24th, the second-largest whale to buy CRV tokens over the counter from Curve founder Michael Egorov (purchasing 17.5 million CRV tokens for 70 million U) transferred 5 million CRV tokens (about $3 million) to Binance, becoming the fourth OTC buyer to transfer/sell CRV tokens. He held 17.5 million CRV tokens through OTC purchases, of which 5 million were transferred to Binance, and the remaining 12.5 million were locked in Curve through two addresses. Subsequently, many institutions and big V’s began selling off their CRV tokens.
DeFi Summer is no longer, the economic dilemma of traditional DeFi
The continuous decline of CRV tokens is directly related to Curve’s experience of being hacked. Although Curve founder Michael Egorov temporarily alleviated the liquidation pressure on CRV with the help of institutions last year, this selling pressure did not disappear after the unlock period, and the selling pressure from institutions and big V’s has been suppressing the rise of CRV.
From a more fundamental perspective, the DeFi track has entered a stage of fierce competition, making it difficult for DeFi leaders to develop; DeFi leader tokens have entered the unlocking period, with continuous selling pressure, making it difficult for them to rise; the lack of recognition by regulatory authorities means that the DeFi track is still niche; coupled with the unusual nature of this bull market, DeFi leaders have not received the attention of funds. Overall, the problems faced by DeFi leaders like CRV in this bull market may be difficult to solve, so perhaps the darkest hour for CRV has not yet arrived. However, in the long run, if Curve can overcome this, as a DeFi leader in infrastructure, there are still opportunities in the future.
