Authored by Asher Zhang for Bitpush
Recently, Curve founder Michael Egorov has liquidated about 100 million CRV tokens from his borrowing position. So, what has the DeFi leader Curve been through recently? Besides the unresolved “old wounds,” what is the real dilemma facing Curve and other DeFi leaders? While Michael Egorov seems to have once again averted disaster, has the crisis really passed?
CRV triggers a liquidation crisis, Michael Egorov may navigate through risks
On June 8th, with Bitcoin falling, CRV started a significant decline; after two days of Bitcoin volatility, on June 11th, Bitcoin plummeted again, forming a bearish engulfing pattern on the daily chart for CRV, showing strong bearish sentiment. Influenced by the macro market, on June 12th, Bitcoin and others started to rebound, with most mainstream coins going up, but CRV was unable to rebound, facing continued bearish pressure. On June 13th, as Bitcoin fell again, mainstream coins dropped significantly, leading to a major collapse for CRV and triggering the massive liquidation of Michael Egorov’s CRV tokens.
On June 13th, data shows that Curve founder Michael Egorov has liquidated about 100 million CRV tokens, worth around $27 million. The remaining position consists of 39.35 million CRV tokens in the main address, borrowing $5.4 million, with a health factor above 1, which temporarily avoids liquidation. Subsequently, as reported by Bitpush, on June 13th, NextGen Venture co-founder Christian posted on X platform that he received 30 million CRV tokens from the Curve founder.
With the support from NextGen Venture co-founder Christian, Michael Egorov may navigate through risks. On June 13th, Curve founder Michael Egorov posted on X, saying, “The Curve Finance team and I have been working hard today to address the liquidation risk issue. Many people know that all of my loans have been liquidated. My position was too large for the market to handle, resulting in a $10 million loss. 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 debt soon, which will help users avoid losses due to this situation.”
Did Michael Egorov suffer losses in this liquidation? Ethereum core developer eric.eth posted on X saying that the Curve founder did not incur any “losses” from the CRV liquidation. He made $100 million in profit from a $140 million CRV position, and selling in the market would lead to the same price (fall) and cause community dissatisfaction. While eric.eth’s statement seems reasonable at first glance, in reality, it is not the case. Michael Egorov’s liquidation was essentially passive, mainly due to sudden changes in the crypto market. If Michael Egorov wanted to sell tokens, he could have coordinated with institutions for liquidation, even though the profit would not change significantly, massive liquidation would have a huge impact on the Curve ecosystem.
Why did CRV keep falling, reviewing the crisis of Curve
As a DEX platform mainly focusing on stablecoins, Curve’s unique advantage lies in crvUSD being paired with various collateral assets, creating a rich scenario for exchanging assets. CRV’s large-scale swap business has always dominated the industry, with the team continuously updating the project, introducing new features, and gaining market trust. When Curve was initially launched, the CRV token reached a high of $63, and during the last bull market, the CRV token remained around $6 for a long time, holding at around $1 during the bear market. However, in this current bull market, instead of starting a bull run, CRV has been falling all the way, with the most critical turning point being July 2023.
In late July 2023, due to a re-entrancy bug caused by the Vyper programming language, four Curve Finance pools were attacked by hackers, resulting in a total loss of about $70 million. This directly led to Curve founder facing significant liquidation risk. However, as this was a malicious attack by hackers, various forces in the crypto market expressed their support for Curve. Besides Egorov selling over 106 million CRV tokens to 19 institutions and investors for fundraising, crypto celebrities like Justin Sun, Du Jun, and Big Brother Ma also purchased CRV. Justin Sun bought 5 million CRV tokens, Du Jun bought 10 million CRV for $4 million, and Big Brother Ma bought 3.75 million CRV tokens for $1.5 million, all pledging to lock them up for six months.
On February 1st, Michael Egorov began unlocking the CRV he sold below market price by 30%. On February 1, 2024, Huang Licheng transferred the 3.75 million CRV he purchased (approximately $1.75 million) to Binance, expecting a +16% return; on the same day, an address named “erwwer” on OpenSea (starting with 0xb0b) transferred the 2.5 million CRV bought OTC from Curve founder Michael Egorov (worth $1.14 million) to Binance; subsequently, Cream Finance and others also started selling. On February 24th, the second-largest whale in terms of OTC CRV purchases from Curve founder Michael Egorov (7 million U buying 17.5 million CRV) transferred 5 million CRV (approximately $3 million) to Binance, becoming the fourth OTC buyer to sell CRV. He kept the 17.5 million CRV he bought through OTC, with 5 million transferred to Binance and the remaining 12.5 million locked in two Curve addresses. Following that, many institutions and big players started selling their CRV.
DeFi Summer is over, old DeFi leaders face economic challenges
The continuous decline of CRV tokens is directly related to Curve’s encounter with hacker attacks. While Curve founder Michael Egorov temporarily alleviated the CRV liquidation pressure last year with the help of institutions, this selling pressure did not disappear after the unlocking period, with institutions and big players continuously suppressing CRV’s rise.
From a more fundamental perspective, the DeFi sector has entered a phase of intense competition, making it challenging for old DeFi leaders to develop; DeFi leader tokens entering the unlocking period face continuous selling pressure, making it difficult for them to rise; lack of recognition by regulatory authorities limits the DeFi sector’s growth; coupled with the unusual nature of this bull market, DeFi leaders have not received much financial attention. Overall, the problems faced by CRV and other DeFi leaders may be challenging to solve in this bull market, suggesting that CRV’s darkest hour may not be over yet. However, in the long run, if Curve can weather the storm, as a DeFi infrastructure leader, there are still opportunities in the future.
