Author: Asher Zhang
Recently, Curve founder Michael Egorov has liquidated approximately 100 million CRV in his lending position. So, what has the DeFi leader Curve recently experienced? Apart from 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 overcome the danger, but has the crisis really passed?
CRV triggers a liquidation crisis, and Michael Egorov may pass the danger
On June 8, as Bitcoin fell, CRV began to plummet significantly; after two days of Bitcoin volatility, on June 11, Bitcoin fell sharply again, and CRV formed a bearish engulfing pattern on the daily chart, with bears dominating. Influenced by the macro market, on June 12, Bitcoin and others started to rebound, with most mainstream coins rising, but CRV was unable to rebound and remained under pressure from bears. On June 13, Bitcoin fell again, mainstream coins plummeted, and CRV experienced a major collapse, leading to the liquidation of a huge amount of CRV tokens held by Michael Egorov.
According to data on June 13, Curve founder Michael Egorov’s lending position has been liquidated by approximately 100 million CRV, worth about $27 million. The remaining position consists of 39.35 million CRV in the main address, with a loan of $5.4 million, currently with a health ratio above 1 and therefore temporarily not subject to liquidation. Subsequently, as reported by “Bi Tui,” on June 13, Christian, a co-founder of NextGen Venture, posted on X platform that he had obtained 30 million CRV tokens from the Curve founder.
With the support of Christian from NextGen Venture, Michael Egorov may pass the danger. On June 13, Curve founder Michael Egorov posted on X platform, “The Curve Finance team and I have been working hard to address 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 debts. 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 debts soon, which will help users avoid losses in this situation.”
Was Michael Egorov harmed in this liquidation? Ethereum core developer eric.eth posted on X platform that the Curve founder did not suffer “losses” from the liquidation of CRV; he made a profit of $100 million from a $140 million CRV position, and selling in the market would have caused the same price (decline) and discontent within the community. While eric.eth’s statement may seem reasonable at first, it is not entirely accurate. Michael Egorov’s liquidation was essentially passive, primarily due to sudden market fluctuations in the crypto market. If Michael Egorov wanted to sell the tokens, he could have easily coordinated with institutions to sell them off in a liquidation method, which, while not yielding significant profits, would have had a significant impact on the Curve ecosystem.
Why did CRV plummet all the way – a review of Curve’s crisis
Curve, as a DEX platform focused on stablecoins, has a unique advantage in that crvUSD can form trading pairs with various collateral, creating a rich ecosystem for exchanging assets. CRV has dominated the large-scale exchange business in the industry and the team has always been updating the project, introducing new features, and gaining market trust. When Curve 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 remained around $1. However, during this current bull market, instead of starting an upward trend, CRV has been falling all the way, with the most significant 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 approximately $70 million. This directly led to a significant liquidation risk for the Curve founder. However, as this was a malicious attack by hackers, various forces in the crypto market have expressed 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 Big Ma Ji have also purchased CRV. Sun Yuchen bought 5 million CRV tokens, Du Jun purchased 10 million CRV for a total of $4 million, and Big Ma Ji bought 3.75 million CRV tokens for $1.5 million, pledging to lock them up for 6 months.
On February 1, Michael Egorov began unlocking CRV tokens that he had sold at a 30% discount below market price. On February 1, 2024, Huang Licheng transferred the 3.75 million CRV tokens he had previously purchased (approximately $1.75 million) to Binance, expecting a profit of +16%; on the same day, an address under the username “erwwer” on OpenSea (starting with 0xb0b) transferred 2.5 million CRV tokens (worth $1.14 million) purchased OTC from Curve founder Michael Egorov to Binance; subsequently, Cream Finance and others also sold off their holdings. On February 24, the second-largest whale who bought CRV OTC from Curve founder Michael Egorov (7 million U purchasing 17.5 million CRV) transferred 5 million CRV (approximately $3 million) to Binance, becoming the fourth OTC buyer to sell CRV. Besides the 5 million CRV purchased through OTC, the whale still holds 12.5 million CRV in Curve lockups through two addresses. Subsequently, several institutions and major investors began selling off their CRV holdings.
DeFi Summer is over, and the economic dilemma of traditional DeFi platforms
The continuous decline of CRV tokens is directly related to Curve’s encounter with hacker attacks. 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 investors has been suppressing the rise of CRV.
From a more fundamental perspective, the DeFi space has entered a phase of intense competition, making it difficult for traditional DeFi platforms to develop; DeFi platform tokens are entering a period of unlocking, with continuous selling pressure making it difficult for them to rise; lack of recognition from regulatory authorities has kept the DeFi space niche; combined with the unusual nature of this bull market, traditional DeFi platforms have not received the same level of attention. Overall, the problems faced by platforms like CRV in this bull market may be difficult to resolve, indicating that CRV’s darkest hour may not have arrived yet. However, looking ahead, if Curve can weather the storm, as a fundamental DeFi infrastructure, the traditional DeFi platforms still hold opportunities for the future.
