Last week, DeFi experienced a major turning point in this cycle. CRV continued to fall to a low of $0.219, and founder Michael Egorov’s lending positions were gradually liquidated. According to Arkham statistics, in less than half a day, Michael’s entire loan positions in 5 protocols were liquidated, totaling $140 million.
Although the current price of CRV has rebounded, the most noteworthy is CVX. On June 17th, according to Binance market data, CVX briefly surged to $4.66 before falling back, rising over 90% in 24 hours.
During an interview with CoinDesk, Michael Egorov mentioned that this liquidation was triggered by a vulnerability in UwU Lend. However, unlike in the past, when CRV dropped, Michael did not replenish in time but allowed a series of liquidations to occur. Due to the large scale of Michael’s positions, the market was unable to handle it, resulting in a default of $10 million.
To quickly eliminate the adverse effects of the accumulated defaults on the market, on the evening of June 13th, crypto fund NDV co-founder and NFT whale Christian announced on social media that they had obtained 30 million CRV from Michael, not only to assist in repaying Michael’s debt but also because Curve had been under pressure due to Michael’s early access to liquidity that project teams normally couldn’t access. With the liquidation completed, it means that Michael has finally exhausted the liquidity he had, and Christian believes “there won’t be any secondary market selling pressure at least until 2028”.
This also means that now is a good time to buy the dip in CRV, and the market performance reflects this. According to data from the Binance platform, when CRV hit $0.219, the trading volume of the CRV/USDT spot pair reached 4.63 billion tokens in just 1 hour (with a trading volume of $1.115 billion), setting a new all-time high for that trading pair. At the same time, CRV has been on the Smart Money top inflow list for two consecutive days.
As the largest stablecoin exchange protocol on Ethereum, most DeFi projects rely on Curve, and the Curve protocol remains effective and immutable. Therefore, we have reason to speculate that Michael’s liquidation may mark the beginning of DeFi’s return.
On June 17th, Curve Finance officially stated that the funds flowing into veCRV last week were six times the weekly inflation. These inflows include direct lockups as well as lockups through Convex Finance, Stake DAO, and Yearn. This is the highest weekly inflow of CRV lockups in recent years.
As one of the three major protocols that started the Curve War, Convex Finance’s TVL reached $1.316 billion at the time of writing, accounting for more than half of Curve’s TVL of $2.285 billion. This also means that Convex chips are more concentrated, and whales have naturally shifted their focus to Convex Finance.
In addition to Christian mentioned earlier, kennel capital member Zoomer Oracle also explicitly stated that they bought CVX at $2.05. Zoomer Oracle believes that CRV/CVX is undervalued, and “Convex is Curve’s beta, with a simple 5x potential”.
Apart from CVX, what other targets are there in the Curve ecosystem?
Michael’s loans have disappeared, the market no longer has post-traumatic stress disorder, bad debts have been cleared, and DeFi may have received good news. In addition to the various DeFi protocols in the Curve War, such as Stake DAO, Yearn Finance, Olympus, and Frax, various algorithmic stablecoin protocols are also playing, as outlined in “Curve War Upgrades to CVX Battle, the Exciting Power Struggle Continues”. Another application of the Curve protocol is to support stablecoin projects through the Curve 3 pool (DAI/USDC/USDT pool).
According to Curve data, the trading volume and TVL of the 3 pool are currently less than a million, which means that the likelihood of more mainstream stablecoins using Curve for trading is low. However, the liquidity of the Curve protocol itself can still support small stablecoin projects.
As the modular market is gradually emerging, more chains are being created, and stablecoins may become a necessity for the continued development of applications on various chains. Therefore, the Curve 3 pool can provide liquidity to these stablecoins, especially algorithmic stablecoins. Of course, since the Curve 3 pool rewards with CRV, this requires CRV to have sufficient value.
After the liquidation, Michael stated that this event may help strengthen Curve’s security measures and lending mechanisms, and may provide better services to users in the coming months. Whether this will truly allow the Curve flywheel to take off again remains to be seen with time.