DEFI

Understanding the founder's liquidation crisis of CurveCRV! Justin Sun provides financial support, high rewards for CRV pool, and starts repaying Aave/FRAX/MIM.

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Understanding the founder

Curve Finance CRV token experienced a drop due to a vulnerability in the programming language Vyper, leading to an attack. Many are now revisiting the past actions of Curve's founder, Michael Egorov, expressing concerns that the heavily borrowed and lent CRV tokens could face liquidation, triggering a chain crisis. Research firm Delphi Digital analyzed the potential scenarios and solutions for Curve.

Recalling the borrowing event by Curve's founder: Over $100 million borrowed, all collateralized with CRV and substantial withdrawals made.

Curve Founder Puts 47% of Circulating CRV to Borrow: Aave, FRAX, MIM

Research firm Delphi Digital outlined the current situation of Curve's founder Michael Egorov borrowing $100 million using CRV as collateral. With Egorov using 427.5 million CRV as collateral, accounting for 47% of the circulation, and facing a 10% drop, it may strain the health of the loans, potentially leading to a series of liquidations. Delphi Digital summarized the debt as follows:

  • In Aave protocol - Egorov collateralized 305 million CRV valued at about $181 million as collateral for a $63.2 million USDT loan; under the liquidation condition that the borrowing ratio should be maintained at 55%, his position would be liquidated at a price of 0.3767 CRV/USDT. If CRV continues to drop, liquidation will be triggered, and he will also need to pay about 4% annual interest.
Egorov's loan situation in Aave before the deadline

High Interest Rates in Fraxlend Could Trigger CRV Crisis

  • In the Fraxlend protocol, Egorov provided 59 million CRV as debt for 15.8 million FRAX
  • Delphi Digital believes that the FRAX/CRV lending pool in Fraxlend, when fully utilized at 100%, with high interest rates, poses a serious threat
  • Delphi Digital believes that with 100% utilization, interest rates will double every 12 hours, reaching nearly 10,000% annualized interest rates in just 3.5 days. Such astronomical rates could eventually lead to his liquidation regardless of the CRV price. With a 75% maximum loan-to-value ratio (LTV), his liquidation price may reach 0.517 CRV/FRAX within 4.5 days, a slight decrease compared to the current price.
  • As of the deadline, Egorov had already repaid over five million FRAX and withdrawn over 18 million CRV. The utilization rate before the deadline had dropped to 54.78%, with an interest rate of 87.174%

Egorov's loan situation in Frax before the deadline
Fraxlend's FRAX/CRV lending pool

  • In addition, Egorov also repaid Abracadabra's MIM loan multiple times on 8/1, redeeming CRV:
Egorov's loan situation in Abracadabra before the deadline

Stay updated on Egorov's debt status

Delphi Digital: Lack of CRV Liquidity Poses Threat to Price

Delphi Digital believes that the large positions at risk due to the lack of CRV liquidity have a serious impact on the CRV price. As of Delphi Digital's deadline, there is approximately $10 million in CRV liquidity on-chain, and about $370,000 in -2% depth on the Binance exchange, it believes the scope of liquidation will expand, significantly impacting the DeFi ecosystem. It was over $640,000 before the deadline

Curve Urgently Launches New Liquidity Pools: crvUSD and CRV/FRAX LP

Delphi Digital stated that Curve has launched a new liquidity pool today, including crvUSD and Fraxlend's CRV/FRAX LP, with high CRV rewards.

Delphi Digital's CRV rewards were as high as 148.99% annualized before the deadline

Before the deadline, nearly $6 million in liquidity had flowed in, reducing the reward annualization to 60.09%.

Curve Founder Sponsored by Justin Sun, OTC Price at 0.4

According to on-chain activities, Curve's founder Michael Egorov on August 1st, repeatedly repaid Abracadabra's MIM debt, repaid FRAX debt, and retrieved CRV; received multiple injections of millions of USDT, including two million US dollars from Justin Sun. Before the deadline, Curve's founder's health index for debt in Aave was 1.57.

After receiving two million US dollars from Justin Sun, Egorov also gave five million CRV to Justin Sun at an OTC price of 0.4, below market value.

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