In an unexpected turn of events, Curve Finance, a decentralized finance (DeFi) platform, experienced an alarming crash in the value of its home-grown token, CRV, leading to substantial financial losses for an array of optimistic investors. The founder of the platform, Michael Egorov, took a severe hit, facing liquidation amounting up to a whopping $140 million in CRV.
The unsparing crunch was qualitatively evidenced by Arkham, a blockchain analysis platform. It clarified that Egorov’s significant lending position fell victim to liquidation, extending across five protocols as a direct consequence of the CRV price slipping beneath his predetermined liquidation threshold.
As the chaos unfurled, Egorov found himself in a challenging spot, with his accounts amassing over a million dollars in debt on Curve’s Llamalend. However, he managed to dodge a potential catastrophe by procuring $6 million in USDT, thereby eliminating the bad debt. Egorov wasn’t spared from troubles yet. He weathered a $5 million liquidation on UwU Lend in the process of making repayments on Inverse to lessen further investment damages.
On the ill-starred 13th of June, another piece of unwelcome news surfaced. An active contributor to Curve, known as Saint Rat, made public the protocol’s accrual of $11.5 million in bad debt. A silver lining projected that the cloud over CRV could disperse if the price climbs to $0.33. This crisis triggered Egorov’s determination to collaborate with the Curve Finance team to combat the debt situation and shield users from its ill effects.
Reacting swiftly to the critical situation, Egorov proposed a radical idea that held promise to stabilize the token’s price. He suggested incinerating 10% of the overall CRV supply. In addition, he declared that active voters would benefit from a three-month surge in deposit rewards across all Curve platforms. This move was orchestrated strategically to stimulate participation and fortify the fragile ecosystem.
The saga wasn’t the inaugural one for Egorov. A year ago, he found himself at the hard end of a $60 million loan borrowed from Aave, which potentially unlocked the Pandora’s Box of bad debt if liquidated. Gauntlet, a risk management firm, advised arresting Aave’s v2 CRV market activity to diminish protocol hazards. Egorov promptly responded to the threat and brokered a private deal, letting go of 106 million CRV for $46 million, repaying most of his Aave debts and debts on other lending platforms. He finally settled his remaining debt to Aave thanks to an $11 million USDT deposit in September.
Just moments before the market crash, CRV was confidently trading at $0.3582 but everything transformed in the blink of an eye. The token plummeted by a staggering 40%, nosediving to its all-time abysmal low of $0.2220. Since then, the token has shown resilience and has clawed back to trade at $0.2880. This partial recovery played a pivotal role in lessening the losses incurred, reducing them by 22% within 24 hours.
