Curve is the DeFi infrastructure, DeFi is the core use case of blockchain, and institutions are rushing into the market.
Written by Alex Liu, Foresight News
Curve leads DeFi gains
Bitcoin stagnated at the psychological level of $100,000, while Alts caught up, causing BTC's market share to fall below 55%.
The DeFi sector performed well, rising by more than 20% in the past 7 days, and Curve Finance's token CRV led the DeFi sector with a weekly increase of more than 50%. Among large-cap DeFi tokens, its performance was second only to THE, which was positively affected by Binance's listing, and Curve ecosystem protocol Convex token CVX.
Why can CRV rise? What is its potential? What related tokens in the ecosystem are worth paying attention to? The author built a position in CRV below 0.3 and has been 'CX' for months. Below is a simple explanation of the holding logic for CRV.
Direct factor: news of institutional entry
After the news release in the above image, CRV surged from 0.5 USDT to break 0.8 USDT. Institutions like BlackRock are betting on the Ethereum ecosystem and entering DeFi through the BUIDL fund. Curve is the infrastructure for DeFi stablecoin pairs and pegged currency exchanges, and the market is betting on Curve's potential for institutional adoption.
The author predicted in their August article 'Viewpoint: To get out of the altcoin bear market, we need DeFi revival' that traditional finance would be on-chain through existing DeFi infrastructure, using Curve, Pendle, and Aave as examples. Subsequently: Aave established cooperation with the Trump family, and Curve introduced institutions like BUIDL for RWA. Pendle may be the next promising target.
Looking back, the bearish selling pressure has been completely released.
Why dare to bottom buy when CRV keeps falling? The judgment in June this year was: the bearish sentiment and selling pressure of Curve Finance have bottomed.
Note: Currently, Frax Finance has become the second largest holder of CVX, with CLever being the largest. The holding logic of FXS is explained later.
For a long time, Curve Finance's biggest risk was undoubtedly founder Michael Egorov's massive borrowing positions using mortgaged CRV tokens for stablecoins, which were completely liquidated in June.
Some call liquidation a 'clever cash-out' because there may not be enough liquidity to support the sale of such a large amount of tokens, thus cashing out gradually through loan positions. But another perspective is: project founders are forced to sell most of their tokens at the bottom.
Curve founder Michael Egorov also has locked CRV. Thinking from a different perspective, the way to maximize benefits is to work hard to BUIDL, allowing the CRV token to have a higher value upon unlocking, with the long-term value of the team and protocol tokens highly bound.
Michael Egorov sold nearly 1.6 CRV OTC at a price of 0.4 USDT during last year's liquidation crisis in August. He bought in at the end of June, with a cost price lower than most institutions/whales, while many institutions have already cut losses.
CRV's trading volume on CEX was significantly higher than that of tokens with the same market cap for a long time, but the price remained stagnant, suggesting a sufficient chip turnover.
Curve has been online for 4 years, and the inflation rate has dropped to 6.3%. Based on a 42.4% locking rate, the actual inflation that CRV has entered circulation is only about 3%.
Looking ahead, innovation and growth points
Market speculation expectations, what innovations and growth points does Curve Finance have in the future?
Potential on-chain foreign exchange products, soft liquidation mechanism lending LlamaLend, crvUSD. Since its launch, crvUSD has generated nearly $150 million in revenue for the Curve protocol.
The launch of scrvUSD helps to promote the adoption of crvUSD. What advantages do crvUSD and soft liquidation mechanism lending have? Recommended reading:
How to have endless money? Without labor, just relax beautifully.
Curve Finance is also expanding into ecosystems outside of EVM.
Ecosystem project, benefits gradually transmitted
Convex (CVX)
Convex holds the most CRV and has the revenue rights from Curve. Whenever the value of CRV rises, the intrinsic value corresponding to each CVX also rises. It is akin to a leveraged version of CRV, which has outperformed CRV in this round of increase.
CLever (CLEV)
Holds the most CVX, further nested. Relatively low market value.
Frax Finance (FXS)
Frax Finance is the second largest holder of CVX. It also has L2 chain Fraxtal, stablecoin product FRAX, dual-token model staking products (sfrxETH, frxETH), lending products... it has everything. Frax has the opportunity to self-close the loop and build a self-sufficient DeFi ecosystem flywheel. The ultimate form is a decentralized on-chain central bank (though it is still far from that).
