Author: Climber, Golden Finance
On June 13th, Beijing time, Curve founder Michael Egorov’s $140 million CRV leveraged position has started liquidating due to the price drop. As of the time of writing, Egorov’s positions on 5 addresses have all fallen below the liquidation threshold, but only the main address has begun liquidation. However, the CRV price has plummeted, experiencing a short-term drop of over 30%.
Last year in July, Curve founder faced a similar liquidation crisis, caused by an external hacker intrusion, sparking 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 Brother Maji provided financial assistance.
Fast forward a year, the financial aid and the crypto bull market seem to have failed to save Curve and its founder from the fate of liquidation. Liquidation of the $140 million position is on the agenda.
In the early hours of June 13th, Arkham posted on X, stating that Curve founder Michael Egorov is facing the liquidation risk of $140 million CRV tokens. Egorov has collateralized around $141 million worth of CRV tokens in five accounts across different protocols, borrowing about $95.7 million stablecoins, mainly crvUSD. The annual interest cost to maintain these loans is as high as $60 million.
Of these, $50 million loan comes from Llamalend, with an annual interest rate of approximately 120%. As there is almost no remaining crvUSD available for borrowing on Llamalend, Egorov’s three accounts have taken over 90% of the loans on the protocol. If the CRV price drops by about 10%, these positions will face the risk of liquidation.
Unfortunately, due to the decline in the crypto market and the impact of market FUD, the CRV price dropped sharply. In less than an hour, the CRV price plummeted by over 30%, reaching a low of $0.219. This directly triggered the liquidation.
According to Lookonchain monitoring, Curve founder Michael Egorov is being liquidated, holding 111.87 million CRV ($33.87 million) collateral and $20.6 million in debt on 4 platforms.
However, according to Ember monitoring, the leveraged positions of CRV loans collateralized by Curve founder on 5 addresses have all fallen below the liquidation threshold. Currently, the positions on Egorov’s main address (0x7a1…428) are undergoing liquidation, while the positions on the remaining addresses have also fallen below the liquidation threshold but have not started liquidating yet.
Furthermore, according to on-chain data analyst @ai_9684xtpa, Curve founder has been liquidated for 29.62 million CRV, with address 0xF07…0f19E being one of the main liquidators. The user at this address liquidated 29.62 million CRV at an average price of $0.2549, spending 7.55 million FRAX, and all these tokens have been deposited into Binance.
Additionally, due to the drop in CRV price, investors have been liquidated for 10.58 million CRV ($3.3 million) on Fraxlend.
Currently, the position on Egorov’s main address (0x7a1…428) shows a CRV quantity of about 2.22 million tokens, with a total wallet value of approximately $1.04 million.
The liquidation of Curve founder and the plummeting CRV price have also led to concentrated selling, as reported by The Data Nerd, a whale deposited 10.926 million CRV (approximately $2.7 million) into Binance. Within an hour, they deposited a total of 24.2 million CRV (approximately $6.936 million) into Binance. CEO Ki Young Ju of CryptoQuant also stated that the exchange’s CRV balance has hit a new all-time high, rising by 57% in the past two hours.
Institutions and celebrities failed to rescue successfully
In late July 2023, due to a reentrancy bug caused by the Vyper programming language, four CurveFinance pools were hacked, resulting in a total loss of around $70 million. This directly put the Curve founder at significant liquidation risk.
However, as this was a malicious hacker attack, various forces in the crypto market expressed support for Curve. Apart from Egorov selling over 106 million CRV tokens to 19 institutions and investors to raise funds, crypto celebrities such as Sun Yuchen, Du Jun, and Brother Maji also purchased CRV tokens.
Sun Yuchen bought 5 million CRV tokens, Du Jun purchased 10 million CRV tokens for $4 million, and Brother Maji bought 3.75 million CRV tokens for $1.5 million, all of which were fully pledged and locked for 6 months.
Regarding the Curve project, Du Jun stated, “Many people ask me why I support Curve, just like when BendDAO faced a liquidity crisis in 2022, we immediately communicated with the project team to provide support.” “These are truly innovative projects, the foundation of the industry. The current difficulties are only temporary. Let’s support each other more, and the industry will be healthier.”
With multiple institutions and prominent figures providing financial assistance, Egorov’s off-exchange fundraising transactions went smoothly, and the health score of Curve’s debts on major DeFi platforms also improved, with Aave V2’s health factor rising to 1.87 and Fraxlend to 1.8.
According to public information, in August last year, to avoid the risk of liquidation due to a drop in CRV prices, 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 to repay the loans at a selling price of $0.4 per token.
However, in September of the same year, Curve’s trading volume plummeted by 97%, and the project’s token CRV has been declining ever since.
It is worth noting that on June 13th, the time from warning to official liquidation of Curve founder’s leveraged positions was rapid, but in fact, in April this year, the founder’s leveraged positions on various platforms entered the danger zone. Several leveraged positions had already dropped to around 1.1 in terms of health ratio.
In April, the crypto market experienced a correction, with altcoins plunging significantly, and the CRV price dropping to around $0.42. This also meant that Curve founder Michael Egorov’s leveraged positions were once again in the danger zone.
At that time, Egorov collateralized 371 million CRV tokens (worth $156 million) across 6 lending platforms using 5 addresses, borrowing $92.54 million stablecoins.
Due to the drop in CRV price, Egorov’s leveraged positions on various platforms have once again entered the danger zone. Several positions have seen their health ratios drop to around 1.1 (meaning that if the CRV price continues to drop by 10% without additional collateral or repayment, liquidation will begin).
In the following two months, it is evident that the Curve founder was not adequately prepared, ultimately resulting in the rapid initiation of the liquidation of his leveraged positions.
Conclusion
The liquidation of Curve founder’s leveraged positions seems to have been destined for a long time, as factors such as the bear to bull transition in the crypto market, a year of recovery, and massive influx of funds have failed to reverse the future. The CRV price continues to decline, causing harm to investors in what was once a well-supported and promising project.
Some community members have pointed out that this wave of operations by Curve is similar to traditional finance, where when equity cannot be greatly reduced, pledging is chosen. If the stock price falls, banks are forced to liquidate positions, and founders are forced to make a profit.
