According to Bitpush, recently, Curve founder Michael Egorov liquidated about 100 million CRV tokens. So, what has DeFi leader Curve experienced recently? Besides the unresolved “old wounds,” what is the real dilemma facing Curve and other DeFi leaders? Michael Egorov, the founder of Curve, seems to have once again turned the tide, but has the crisis really passed?
CRV Triggered Liquidation Crisis, Michael Egorov May Pass Through Risk
On June 8th, along with the decline of Bitcoin, CRV started to plummet. After two days of Bitcoin fluctuations, on June 11th, Bitcoin once again plunged significantly, forming a bearish engulfing pattern on the daily chart for CRV, with strong bearish momentum. Influenced by the macro market, on June 12th, Bitcoin and others started to rebound, with most mainstream coins rising, but CRV was unable to rebound, facing continuous bearish pressure. On June 13th, Bitcoin fell again, mainstream coins plummeted, and CRV experienced a major collapse, leading to the liquidation of a large amount of CRV tokens by Michael Egorov.
On June 13th, data showed that Curve founder Michael Egorov liquidated about 100 million CRV tokens, worth about $27 million. The remaining position is about 39.35 million CRV tokens in the main address, with a loan of $5.4 million, and the health ratio is above 1 and will not be liquidated temporarily. Subsequently, according to Bitpush, on June 13th, Christian, a co-founder of NextGen Venture, announced on platform X that he obtained 30 million CRV tokens from Curve founder.
With the support of NextGen Venture’s co-founder Christian, Michael Egorov may pass through the risk. On June 13th, Curve founder Michael Egorov posted on platform X, saying, “Curve Finance team and I have been working hard to resolve the liquidation risk issue today. Many people know that all my loans have been liquidated. My position was too large for the market to bear, 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 harmed in this liquidation? Ethereum core developer eric.eth posted on platform X, stating that the Curve founder did not suffer a “loss” due to the liquidation of CRV. He made a profit of $100 million from a $140 million CRV position, and selling in the market at the same price (drop) would cause dissatisfaction in the community. While eric.eth’s statement may seem reasonable, in fact, it is not entirely true. Michael Egorov’s liquidation was essentially passive and mainly due to the sudden changes in the crypto market. If Michael Egorov wants to sell tokens, he could have easily coordinated with institutions to sell the tokens in a liquidation manner. Although the profit change may not be significant, the massive liquidation would have a significant impact on the Curve ecosystem.
CRV’s Continuous Decline, Reviewing the Origin of Curve Crisis
Curve, as a DEX platform mainly for stablecoins, has the unique advantage of crvUSD forming trading pairs with various collateral assets, creating a rich scene of exchangeable assets. CRV’s large-scale exchange business has always dominated the industry, and the team has been constantly updating projects, launching new features, and gaining trust in the market. When Curve was first launched, the CRV token reached a high of $63, and during the last bull market, the CRV token remained around $6 for a long time, and during the bear market, the CRV token value remained around $1. However, during this 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 hacked, 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 attack by hackers, various forces in the crypto market expressed support for Curve. In addition to Egorov selling over 106 million CRV tokens to 19 institutions and investors to raise funds, 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 a total of $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 CRV that he sold at a price 30% below the market value at the time. On February 24th, the second-largest whale who bought CRV from Michael Egorov OTC (700 million U to buy 1750 million CRV) transferred 5 million CRV (about $3 million) to Binance, becoming the fourth OTC buyer to sell CRV. Besides the 5 million CRV transferred to Binance, another 12.5 million CRV is locked in two Curve addresses. Subsequently, many institutions and major players began selling their CRV holdings.
DeFi Summer is Over, Old DeFi Faces Economic Dilemma
The continuous decline of CRV is directly related to Curve’s encounter with a hacker attack. From a broader perspective, this is fundamentally related to the overall downturn of the DeFi track. If it were the DeFi Summer period in 2022, the losses suffered by CRV could have been compensated. So, what are the reasons for the current economic dilemma facing the DeFi track?
The DeFi track has transitioned from a blue ocean to a red ocean, with reduced attractiveness of DeFi leaders. From the development of the DeFi track itself, there was apparent competition when Uniswap, Curve, and Compound were born. The Web’s biggest feature is being open-source and decentralized, leading to the emergence of various DeFi projects. Although DeFi leaders still dominate, they face significant competition, transforming the entire track from a single leader to a fiercely competitive red ocean battlefield.
DeFi leader tokens are entering the unlocking period, increasing selling pressure and making it difficult for DeFi leader tokens to rise. The value capturing ability of mainstream DeFi leader tokens is still lacking.
DeFi Development Enters a Bottleneck Period, US Law Enforcement Does Not Recognize DeFi
Earlier, Gurbir Grewal, head of the enforcement department of the US Securities and Exchange Commission (SEC), stated, “We don’t care about labels. We care about the product, labels are not important to us. Technology is important. DeFi provides services that are neither decentralized nor financial, just pure ‘fraud.’ We will expand our jurisdiction within the limits allowed by law.” This year, the SEC classified UNI as a security, leading to a certain pessimistic outlook on its development prospects. Due to the lack of recognition from US regulatory authorities, DeFi is limited in its path to traditional financial markets, restricting the market size of DeFi.
Market attention is shifting to new tracks like MEME, reducing the focus on funds. In this bull market, some new tracks have emerged, such as modular blockchains, Depin, Bitcoin Layer 2, but the most unique is the MEME track. From the runes of 2023, symbols, ERC404, and Bonk and BOME on Solana. Whenever Bitcoin consolidates, there is no market rotation, but there is a alternating trend of MEME fever, preventing DeFi leaders from getting a chance to rebound.
In conclusion, the token price of CRV is falling due to Curve’s encounter with a hacker attack. Although Curve founder Michael Egorov temporarily alleviated the liquidation pressure on CRV last year with the help of institutions, this selling pressure did not disappear after the unlocking period, and the selling pressure from institutions and major players 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 are entering the unlocking period, with continuous selling pressure making it difficult to rise. The lack of recognition from regulatory authorities means that the DeFi track remains niche, combined with the unusual nature of this bull market, the DeFi leaders have not garnered much attention. Overall, the problems faced by CRV and other DeFi leaders in this bull market may be difficult to resolve, and CRV’s darkest hour may not have arrived yet. However, in the long run, if Curve can persevere, as a DeFi infrastructure leader, there are still opportunities in the future.