Last week, the DeFi sector experienced a significant turning point in this cycle. CRV continued to plummet to a low of $0.219, with founder Michael Egorov gradually facing liquidation of his lending positions. According to Arkham statistics, in less than half a day, Michael’s entire loan positions in 5 protocols were liquidated, amounting to $1.4 billion.
While CRV’s price has since rebounded, the spotlight is now on CVX. On June 17th, according to Binance market data, CVX surged briefly to $4.66 before retracting, recording a more than 90% increase in just 24 hours.
In an interview with CoinDesk, Michael Egorov indicated that this liquidation was sparked by a vulnerability in UwU Lend. Unlike previous instances of CRV downturns, Michael did not rush to replenish his positions, allowing a chain of liquidations to occur. Due to the large scale of Michael’s positions, the market was unable to handle it, resulting in a $10 million loss.
To quickly eliminate the negative impact of the accumulated bad debt on the market, on the evening of June 13th, crypto fund NDV’s co-founder, and NFT whale Christian, announced on social media that they had obtained 30 million CRV from Michael. Besides assisting Michael in repaying his debts, Christian also mentioned that the pressure on Curve was due to Michael acquiring liquidity that projects normally couldn’t access. With the liquidation now complete, it signifies that Michael has finally exhausted his liquidity, leading Christian to believe that “there won’t be any secondary market selling pressure until at least 2028.”
This presents a prime opportunity to buy CRV at a low, and the market performance reflects this. According to Binance platform data, when CRV hit $0.219, the trading volume for CRV/USDT soared to 4.63 billion tokens in just 1 hour (with a trading value of $1.115 billion), setting a new historical high for that trading pair. Additionally, CRV has consecutively ranked high on the Smart Money 24-hour inflow list for two days.
As the largest stablecoin exchange protocol on Ethereum, most DeFi projects rely on Curve, and the Curve protocol remains functional and immutable. Therefore, it is reasonable to speculate that Michael’s liquidation may signal the beginning of a DeFi revival.
On June 17th, Curve Finance officially announced that the funds flowing into veCRV last week were six times the weekly inflation. These inflows include direct locking, as well as locking through Convex Finance, Stake DAO, and Yearn. This marks the highest weekly inflow of CRV locking in recent years.
As one of the three protocols to kick off the Curve War, Convex Finance’s TVL reached $1.316 billion at the time of writing, accounting for half of Curve’s TVL ($2.285 billion). This concentration of chips in Convex indicates that whales are naturally turning their focus to Convex Finance.
Apart from 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 that “Convex is Curve’s beta, with a simple 5x potential.”
Besides CVX, what other opportunities exist in the Curve ecosystem?
With Michael’s loans gone, the market no longer bears the trauma of past stress, bad debts have been cleared, and DeFi may have received a positive boost. In addition to the various DeFi protocols involved in the Curve War, such as Stake DAO, Yearn Finance, Olympus, and Frax, various stablecoin projects can be seen in action. Another application of the Curve protocol is supporting 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 under a million, indicating that mainstream stablecoins may not be using the Curve platform for trading. However, the liquidity provided by the Curve protocol can still support smaller stablecoin projects.
As the modular market is gradually emerging, more chains are likely to be created to sustain the development of application scenarios. Stablecoins may become essential in various chains, and the Curve 3 pool can provide liquidity to these stablecoins, especially algorithmic stablecoins. Since the Curve 3 pool rewards in CRV, the value of CRV itself must be substantial.
Following the liquidation, Michael mentioned that this event may help strengthen Curve’s security measures and lending mechanisms, potentially providing better services to users in the coming months. Whether this will truly propel the Curve flywheel back into motion remains to be seen over time.
