Author: Climber, Golden Finance
On June 13th, the $140 million CRV leverage position held by Curve founder Michael Egorov began to be liquidated as the coin price plummeted. At the time of this writing, all positions on Egorov’s 5 addresses had fallen below the liquidation threshold, with only the primary address undergoing liquidation. However, the CRV price experienced a sharp drop, falling by over 30% in a short period of time.
Last year in July, the Curve founder also faced a liquidation crisis, which was caused by external hackers. This incident prompted a wave of support for the Curve project in the crypto market. Dozens of institutions and prominent figures in the crypto community, such as Sun Yuchen, Du Jun, and Ma Ji, provided financial assistance.
Fast forward a year, the financial aid and the bullish trend in crypto seemed unable to save Curve and its founder from the fate of being liquidated. The liquidation of the $140 million leverage position is now underway.
In the early hours of June 13th, Arkham posted on X platform that Curve founder Michael Egorov was facing the risk of liquidating $140 million worth of CRV tokens. Egorov had collateralized approximately $141 million worth of CRV tokens across five different protocols, borrowing around $95.7 million in stablecoins, mainly crvUSD. The annual interest cost to maintain these loans amounted to $60 million.
Of the $50 million borrowed from Llamalend, with an annual interest rate of around 120%, Egorov’s three accounts had taken up over 90% of the available crvUSD for borrowing on the platform. A 10% drop in the CRV price would put these positions at risk of liquidation.
Unfortunately, due to the decline in the crypto market and the impact of FUD, the CRV price plummeted, dropping by over 30% in less than an hour, reaching a low of $0.219. This directly triggered the liquidation process.
According to Lookonchain monitoring, Curve founder Michael Egorov is being liquidated, with Michael currently holding 111.87 million CRV tokens ($33.87 million) as collateral and $20.6 million in debt across four platforms.
However, according to Ember monitoring, all the leveraged positions collateralized with CRV on Egorov’s five addresses have fallen below the liquidation threshold. Currently, the positions on Egorov’s primary address (0x7a1…428) are undergoing the liquidation process, while the positions on the other addresses have also fallen below the liquidation threshold but have not yet begun liquidating.
Furthermore, due to the drop in CRV price, investors have been liquidated on Fraxlend, losing 10.58 million CRV tokens ($3.3 million).
Currently, the position on Egorov’s primary address (0x7a1…428) shows approximately 2.22 million CRV tokens, with a total wallet value of around $1.04 million.
The liquidation of Curve founder and the drastic drop in CRV price have led to concentrated selling behavior. According to The Data Nerd data, a whale deposited 10.926 million CRV tokens (approximately $2.7 million) into Binance. Within an hour, they deposited a total of 24.2 million CRV tokens (approximately $6.936 million) into Binance. CryptoQuant CEO Ki Young Ju also stated that the exchange’s CRV balance hit a new all-time high, rising by 57% in the past two hours.
Institutions and prominent figures unable to rescue successfully
In late July 2023, due to a re-entrancy vulnerability caused by the Vyper programming language, four CurveFinance pools were attacked by hackers, resulting in a total loss of approximately $70 million. This directly put the Curve founder at significant risk of liquidation.
However, as this was a malicious hacker attack, various forces in the crypto market expressed their support for Curve. In addition to Egorov selling over 106 million CRV tokens to 19 institutions and investors, crypto celebrities such as Sun Yuchen, Du Jun, and Ma Ji also purchased CRV tokens.
Sun Yuchen bought 5 million CRV tokens, Du Jun purchased 10 million CRV tokens for a total of $4 million, and Ma Ji bought 3.75 million CRV tokens for $1.5 million, all of which were fully pledged and locked up for six months.
Regarding the Curve project, Du Jun stated, “Many people ask me why I support Curve, just as when BendDAO faced a liquidity crisis in 2022, we immediately communicated with the project team to provide support.” “These are truly innovative projects, the infrastructure of the industry. The current difficulties are only temporary, so we should support them together for a healthier industry.”
With multiple institutions and prominent figures providing financial assistance, Egorov’s off-exchange fundraising transactions proceeded smoothly. The debt health on major DeFi platforms for Curve also improved, with a health factor of 1.87 on Aave V2 and 1.8 on Fraxlend.
Public records show that in August last year, to avoid liquidation due to a drop in CRV price, Michael sold 159.4 million CRV tokens to 33 investors/institutions through over-the-counter (OTC) trading, exchanging them for $63.76 million in stablecoins at a price of $0.4 per token.
However, in September of the same year, Curve’s trading volume plummeted by 97%, and its project token CRV has been on a downward trend ever since.
It is worth noting that on June 13th, the liquidation of Curve founder’s leverage position from warning to formal liquidation occurred rapidly. However, back in April of this year, the founder’s leverage positions on various platforms had already entered the danger zone, with several positions having a health ratio drop to around 1.1.
During the crypto market correction in April, altcoins experienced a significant drop, with the CRV price falling to around $0.42. This meant that Curve founder Michael Egorov’s leverage positions were once again in the danger zone.
At that time, Egorov collateralized a total of 371 million CRV tokens ($156 million) through five addresses on six lending platforms, borrowing $92.54 million in stablecoins.
Due to the drop in CRV price, Egorov’s leverage positions on various platforms had once again entered the danger zone. Several positions had health ratios drop to around 1.1 (i.e., they would start liquidating if the CRV price continued to drop by 10% without replenishment or repayment).
In the following two months, it was evident that the Curve founder was not adequately prepared, ultimately leading to the rapid liquidation of his leverage positions.
Conclusion
The liquidation of the Curve founder’s leverage positions seemed destined long ago, with elements such as the bearish turn of the crypto market, a year of recovery, and massive influx of funds unable to reverse the future. The CRV price continues to decline, and what was once a promising project supported by capital and endorsements ultimately ends up hurting investors.
In response to this, some community members expressed that this operation by Curve is similar to traditional finance, where if equity cannot be significantly reduced, pledging is chosen, and if the stock price falls, banks are forced to liquidate positions, making the founder profit.